AI-linked shares, particularly chipmakers, dropped around the world, sending many indices sliding. South Korea\u2019s main share index, the Kospi, fell 11.5% on Tuesday<\/a> and a further 6% on Wednesday<\/a>, dragged down by its two biggest companies \u2013 the semiconductor maker SK Hynix and Samsung Electronics.<\/p>\n On Thursday, the main US tech index, the Nasdaq, fell into correction territory at one point after dropping more than 10% from its recent high, before easing back. Nvidia lost more than 5% by Thursday evening, by which time it had been overtaken by Apple as the world\u2019s largest listed company<\/a>.<\/p>\n The next day there was a big rebound, when strong financial results from Amazon and Microsoft calmed traders\u2019 nerves. The Kospi jumped nearly 20% \u2013 although the week\u2019s slump still means it recorded its worst month since the height of the global financial crisis in October 2008.<\/p>\n So, what exactly do these advances mean, and why have they got western investors so jittery?<\/p>\n CXMT\u2019s debut is impressive. But the company is arguably more of a boon to the global AI economy than a threat. It makes dynamic random-access memory (Dram) chips, which store the data that other AI chips draw on for their calculations.<\/p>\n There is a global shortage of Dram chips, which is why phones and computers are expected to get far more expensive<\/a>. Crucially, they are not graphics processing units (GPUs) \u2013 which are the key chips and the \u201cbrains\u201d in an AI system.<\/p>\n This means, put simply, that CXMT is not a threat to GPU maker Nvidia, the biggest company in the AI economy and the only one making a profit<\/a> on AI. They produce complementary, not competing goods.<\/p>\n China\u2019s president, Xi Jinping, speaks at the opening of the World Artificial Intelligence Conference in Beijing. China is making rapid advances in the semiconductors used to drive AI. Photograph: Greg Baker\/AFP\/Getty Images<\/p>\n The Chinese company could be a threat to SK Hynix and Micron, which do make memory chips. However, Alvin Nguyen, an analyst at the research firm Forrester, said the sell-off in these shares was an \u201coverreaction\u201d given that the global memory chip shortage is likely to continue until 2030.<\/p>\n \u201cSK Hynix, Micron, others, they can\u2019t produce enough memory chips to begin with \u2026 the demand keeps growing even higher,\u201d Nguyen said.<\/p>\n A more serious concern could be the news that China can make the lithography tools. These are essentially extremely precise lasers that allow chipmakers to etch the thinnest lines in the world into wafers of silicon.<\/p>\n Until now, only ASML could manufacture such machines. If this week\u2019s reports are correct, Beijing could \u2013 in theory \u2013 produce GPUs that rival Nvidia\u2019s. This would spell trouble for the world\u2019s biggest company, and therefore Wall Street. But a serious competitor is still years away.<\/p>\n \u201cFabs [semiconductor fabrication plants], as I know them, still take years to develop,\u201d said Nguyen.<\/p>\n Mark Boost, the chief executive of the UK cloud company Civo, agreed. \u201cInvestors are overreacting to the short-term threat,\u201d he said. \u201cManufacturing a handful of [deep-ultraviolet] machines is a massive symbolic victory, but not a commercial replacement for ASML overnight.<\/p>\n skip past newsletter promotion<\/a>Free newsletter | Every weekday<\/p>\n Sign up to Business Today<\/p>\n Get set for the working day \u2013 we’ll point you to all the business news and analysis you need every morning<\/p>\n after newsletter promotion<\/p>\n \u201cFabs run on efficiency and yield, and until these Chinese tools can match western reliability, ASML\u2019s global dominance remains structurally safe outside mainland China.\u201d<\/p>\n Long term, this week\u2019s advances are gamechanging for the AI economy, although in many ways they should have been predictable. Given US export controls, China has had little choice but to develop domestic capabilities<\/a>.<\/p>\n Chris Beauchamp, the chief market analyst at IG, an online share trading company, said: \u201cThese Chinese chip companies appear poised to do to the big chipmakers what they have done to steel, automobiles and a host of other industries, namely undercut them and outcompete them on price.\u201d<\/p>\n It may be that last week\u2019s correction is an overreaction \u2013 but also a reasonable response to a circular and extremely opaque AI economy that rests heavily on the fate of a single company, Nvidia.<\/p>\n Its shares are gradually creeping up again, although they are still below what they were last week. A contributing factor to the investor skittishness appears to be yet another circular, opaque deal.<\/p>\n Last Sunday, the Wall Street Journal reported that Nvidia was considering providing a $250bn (\u00a3186bn) backstop<\/a> to OpenAI for a large datacentre project. This comes roughly half a year after a $100bn deal between the two companies fell apart<\/a>.<\/p>\n It was a significant factor in Nvidia\u2019s decline over the week, according to Morningstar<\/a>. The anxiety that underlies this is that the company has become the \u201ccentral bank of AI<\/a>\u201d \u2013 holding up vast parts of the economy, and the global stock market, in ways that most people, investors included, do not understand.<\/p>\n Many believe that it cannot last. What is on the other side is less clear.<\/p>\n \u201cNvidia knows the gravy train\u2019s going to run out,\u201d Nguyen said. \u201cEverybody\u2019s waiting for them to fall apart. I don\u2019t know that they will because what they do still has value \u2026 at some point in the future, they\u2019ll no longer be one of the most valuable companies in the world. Maybe \u2026 they\u2019ll be worth only $2tn. It\u2019s still pretty good.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Even for the rollercoaster world of AI, last week was particularly volatile as investors scrambled to keep up…\n","protected":false},"author":2,"featured_media":839635,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[256,254,255,64,63,105],"class_list":["post-839634","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-artificial-intelligence","tag-artificialintelligence","tag-au","tag-australia","tag-technology"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/839634","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=839634"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/839634\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/839635"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=839634"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=839634"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=839634"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/06\/1782323175_693_500.jpg\")
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