Chip Stocks Plunge as $750 Billion AI Deals Spark Circular Funding Fears
Korean semiconductor makers lead global sell-off while investors question sustainability of Nvidia-backed AI infrastructure spending.
Market Rout Hits Korean Chipmakers
Global semiconductor stocks tumbled this week as investors grew skeptical of AI spending sustainability, with Korean chipmakers leading the decline. Samsung Electronics dropped 7.59% and SK hynix fell 8.34% on July 24, 2026, as concerns over circular funding models converged with geopolitical tensions.
The Kospi index plummeted 406.27 points, or 5.72%, to close at 6,690.62. The decline reflected both chip-specific pressures and broader anxiety over Middle East tensions following US-Iran strikes.
Memory Stocks Under Pressure
Memory-focused equities suffered notable declines. The Roundhill Memory ETF fell between 4% and 8.5% across the week ending July 24, according to trading data. Micron Technology dropped 5% on July 27, following a 7% weekly decline.
Analysts point to multiple headwinds: intensifying competition from Chinese manufacturers, including recent IPO activity by CXMT, and growing skepticism about whether AI infrastructure demand can justify current valuations.
The $750 Billion Question
At the center of investor anxiety stands Nvidia Corp., which is reportedly working on AI infrastructure deals exceeding $750 billion. These remain ongoing negotiations rather than completed transactions, according to Bloomberg reporting.
Among the most scrutinized arrangements: Nvidia is in discussions to provide approximately $250 billion in financing guarantees for an OpenAI data center lease in Ohio. The chipmaker has already invested $30 billion in OpenAI as of early 2026, with talks continuing on a total commitment potentially reaching $100 billion including chip purchase financing.
Circular Funding Concerns Resurface
The arrangements have revived concerns about what analysts term "circular funding"—a model where chip suppliers invest capital into AI startups that then use those funds to purchase more chips from the same suppliers.
This structure creates a self-reinforcing cycle that may inflate apparent demand. While the core mechanism is confirmed across multiple outlets including the Wall Street Journal, Bloomberg, and New York Times, analysts remain divided on whether this poses imminent systemic risk or simply reflects standard venture financing adapted to capital-intensive AI infrastructure.
What Comes Next
The current market movement suggests investors are beginning to price in uncertainty around AI spending sustainability. Whether this represents a healthy correction or the early stages of a broader revaluation depends largely on whether end-user demand can eventually justify the unprecedented infrastructure buildout.
For now, the semiconductor sector faces a dual challenge: navigating geopolitical instability while proving that AI demand extends beyond financially interconnected counterparties.