Positioning Unwind Drives Sell-Off in AI and Chip Stocks
A positioning unwind is driving the latest AI and chip sell-off, with little evidence of bottom fishing as crowded exposure is cut rather than repriced on fundamentals. The global chip rout hit Taiwan and Japan as MSCI’s Asia Pacific equity gauge fell 2.7% and the Nikkei slid more than 5%, while Kioxia dropped as much as 16% and TSMC fell roughly 4%. Even after posting 77% earnings growth, TSMC did not attract buyers, reinforcing that flows are outweighing company results. Elsewhere, Netflix forecast a second consecutive quarter of slowing sales growth; its shares fell 9% in extended trading, Nasdaq 100 futures lost 1.4%, and European equities were set to open more than 1% lower.
Shifting Profit Narratives and Competitive Pressures in AI
The repricing is also being shaped by a shifting profit narrative. DeepSeek, a Chinese start-up that has raised $7.4 billion at a valuation above $50 billion, is preparing global expansion with AI models priced well below US rivals, challenging scarcity-based assumptions behind premium margins. Cheaper, scalable models could boost token demand and corporate adoption, but push value towards power, infrastructure and distribution, and towards operators able to run low-cost deployment at scale, leaving parts of the AI stack with thinner profitability.
