A brutal session for chip stocks and a fund manager survey point to the AI trade turning

A “brutal session” for chip stocks shows the AI trade is turning, Reuters reported in an analysis of the selloff¹. The piece pointed to the financing behind the buildout, noting that Japan’s tech investor SoftBank last month sold the biggest high-yield debt pile ever and promised to pay as much as 9.75% on $4.5 billion it raised^1,3.

The selloff reached beyond Wall Street. A chip selloff dragged Asian markets lower as Wall Street earnings and US inflation data loomed, one market wrap reported, noting that because US rates influence global capital flows the data matters well beyond American markets⁶. Among individual names, TTM Technologies was down 17.1% after accelerating its AI-focused capacity expansion⁵.

Reuters presented the session as evidence of a turn rather than as a single day’s volatility, and tied that reading to the debt raised to fund the buildout^1,3.

Why it matters to investors

Positioning data landed the same day. Chips and Treasurys were what fund managers had on their minds in the latest Bank of America survey, which found the most likely source of a credit event was judged to be AI hyperscaler capital spending, by 39% of respondents, followed closely at 28% who said government debt².

That is a survey of expectations rather than a measure of stress, and spending plans have not turned with sentiment. Analysts still expect sustained strength in AI-related investment, and Bank of America notes the top five hyperscalers are on pace to grow capital spending further⁴.

The survey’s second-ranked worry is instructive too: government debt was named by 28% of managers, which puts sovereign borrowing and AI capital spending in the same frame rather than in competing ones².

What to watch

The immediate test is earnings. One account argued that great results will not be good enough this AI earnings season, which sets a higher bar than the beat-and-raise pattern that has carried the trade⁴. The second test is US inflation data, which the Asian market wrap identified as the event the selloff was running into⁶.

On the financing side, watch the cost of debt for the buildout rather than the equity prices, since the SoftBank issue cited by Reuters is the clearest price yet put on that risk^1,3. SoftBank trades under the code 9984 in Tokyo¹.

Finally, watch whether single-name moves like TTM’s keep punishing announcements of capacity expansion, which would mark a change in how the market rewards AI capital spending^2,5.