Global AI chip stocks plunge as investors question returns on massive spending

AI chip stocks plunged globally in a broad sell-off, with the Philadelphia Semiconductor Index dropping sharply even as major companies like Samsung and Micron posted record, AI-driven profits. The decline stems not from falling demand for chips but from investor skepticism about whether the massive capital spending on AI infrastructure will yield sufficient returns, coupled with concerns over inflated valuations and a potential Federal Reserve interest rate hike. Hedge funds are actively dumping tech hardware stocks for a fourth consecutive week, signaling fatigue after the semiconductor sector's strongest quarter on record and fears that hyperscalers may soon cut back on their 67% rise in AI spending. This market turmoil affects investors worldwide and casts doubt on the sustainability of the current AI boom, despite strong underlying fundamentals in memory and chip manufacturing.