AI Capex Skepticism and China Competition Trigger Semiconductor Selloff
Bloomberg’s Peter Elstrom argues that the semiconductor selloff reflects a shift in how investors view AI spending, combined with mounting concern over China’s progress across models, chip equipment and memory. He says Alphabet’s capex plans are no longer being rewarded automatically, while Chinese developers including Moonshot and Alibaba, reported lithography advances, and memory maker CXMT pose distinct challenges to established AI and chip leaders.
The AI trade is repricing spending and competitive risk
Peter Elstrom described a market reversal in which AI-industry valuations, after going “up and up and up and up,” were beginning to come down with additional momentum. One signal, he said, was the reaction to Alphabet’s planned increase in capital expenditure. Alphabet reported the prior week that it would raise capex, and Elstrom said the announcement hit the stock hard—whereas a similar commitment a few months earlier would likely have helped it.
That reversal matters because it changes the interpretation of spending that had supported the AI trade. Elstrom’s reading was not simply that companies are spending more, but that investors had become more sensitive to the cost and payoff of that spending.
Ed Ludlow pointed to selling first visible in European trading in ASML and then carried into the U.S. session. The market, Ludlow said, was paying close attention to what China may be capable of doing in its domestic chip industry. Elstrom framed China’s progress as one of several overlapping concerns: competition in AI models, potential advances in chipmaking equipment, and a newly public memory-chip challenger.
The market data shown alongside those claims reflected broad intraday pressure across the semiconductor sector.
| Security or index | Intraday level | Point decline | Percentage decline |
|---|---|---|---|
| PHLX Semiconductor Index | 10,986.94 | 567.94 | 4.92% |
| Intel | 86.08 | 5.59 | 6.13% |
| Advanced Micro Devices | 453.43 | 41.52 | 8.39% |
| ASML Holding | 1,572.06 | 83.20 | 5.03% |
| TSMC ADR | 386.23 | 12.86 | 3.22% |
The displayed moves do not establish a single cause for the selloff. But they provided the market backdrop for Elstrom’s argument that rising concern over AI spending was arriving alongside new questions about the competitive position of established chip and AI leaders.
China’s model challenge extends beyond one company
Peter Elstrom treated Chinese AI-model development as one component of the concern rather than the whole explanation for semiconductor weakness. Moonshot, he said, had been a “wake-up call” that AI models in China are very good. His point was that DeepSeek was not an isolated case: he also named Moonshot and Alibaba among the Chinese companies with strong models.
It’s not just DeepSeek, you also have Moonshot, you have Alibaba, you actually have quite a few of them that are very strong.
That distinction broadens the competitive question. The issue Elstrom identified was not merely whether one Chinese model could attract attention, but whether several developers were becoming credible at the same time. In his framing, that development sits alongside competition farther down the technology stack, where the ability to make chips and supply memory can affect the economics and independence of a domestic AI industry.
Equipment self-sufficiency and memory scale threaten different incumbents
Peter Elstrom pointed to reported Chinese progress in lithography—the machines used to make chips—as a separate pressure point. If China can advance in that area, he said, ASML would be affected in particular. It may also provide China with machines that are more cost-advantageous for its own chip industry.
The implication is distinct from model competition. Stronger Chinese AI models raise questions about the competitiveness of AI developers; domestic lithography progress would raise questions about China’s access to, and cost of, the equipment needed to manufacture chips. ASML shares were shown down 5.03% intraday, part of the broader chip selloff displayed on screen.
Memory was the third front in Elstrom’s account. He highlighted CXMT’s public listing in China that week, saying the company’s emergence had not received enough attention. He described CXMT as effectively the fourth major memory-chip maker, positioned to compete with SK Hynix and Samsung.
This is really the fourth big memory chip maker out there. It’s gonna compete with SK Hynix and Samsung.
Elstrom said CXMT’s market value was $460 billion, making it already the most valuable company listed in China and potentially soon the most valuable listed Chinese company anywhere. He said its scale was putting pressure particularly on SK Hynix, Samsung, and Micron—companies whose stocks had recently been “on a tear.”
The three vectors therefore affect different parts of the existing chip and AI market. Model developers compete in AI capabilities; lithography progress could reduce reliance on an equipment supplier such as ASML; and CXMT introduces a major prospective competitor to established memory suppliers. Elstrom’s point was cumulative: add those concerns to a market newly questioning AI capex, and the result is a more fragile backdrop for semiconductor valuations.