Key Takeaways:
The US memory chip and hardware supply chain index fell 2.87% to 197.07 points on Wednesday, led by storage names SanDisk and Western Digital.
"AI investors have been spooked by cheap frontier AI models from China with as-good-as benchmarks compared to leading U.S.-origin models and vastly better token economics," Argus Research said in its July market summary, as concerns grow that low-cost models could erode the economics underpinning AI infrastructure spending.
SanDisk dropped 5.4% and Western Digital fell 5.36%, while Teradyne, Lam Research, Rambus, Applied Materials and Seagate Technology declined as much as 3.51%. Micron Technology rose 0.06%, and SK Hynix's US-listed shares fell 2.17%. The index touched a session high of 206.67 points at 21:50 Beijing time before sliding steadily from 03:00.
The selloff in memory and storage names extends a broader pullback in AI-linked hardware after the S&P 500's Information Technology sector surged more than 32% in the second quarter, only to shed 120 basis points of index weighting in July on profit taking. The 10-year Treasury yield stood at 4.75% at the end of July, up from 4.14% at year-end 2025, keeping pressure on high-valuation growth stocks. The S&P 500 was up 10.1% year to date through July, while the Nasdaq Composite gained 9.5%.
The decline also coincides with moves by AI model developers to cut inference costs. Anthropic confirmed it is building an in-house chip team, a co-design bet that could halve Claude inference costs, according to a report. Cheaper inference would reduce the computing demand that has driven memory and storage orders, a dynamic traders pointed to as a possible driver of Wednesday's slide.
For investors, the question is whether the memory selloff reflects a one-day rotation or the start of a reassessment of AI hardware demand. Memory and storage suppliers have been among the biggest beneficiaries of the AI buildout, with Seagate and Western Digital forecast to post 90%-plus earnings growth for the second quarter. A sustained decline in those names would signal that the market is beginning to price in weaker demand for the components that power AI data centers.
This article is for informational purposes only and does not constitute investment advice.
