The world's most valuable chip stocks lost more than $1.3 trillion in market capitalisation this week as investor confidence in AI infrastructure spending wavered.

Nvidia led the rout with a $238 billion decline since Friday's close. Memory giants SK Hynix, Samsung Electronics, and Micron shed $176 billion, $173 billion, and $113 billion respectively.

AMD lost around $110 billion while Taiwan Semiconductor Manufacturing Co dropped $119 billion. The Philadelphia semiconductor index has fallen nearly 20% over the past month despite rising 92% over the past year.

Sentiment shift on AI spending

"This decline appears to be driven largely by sentiment rather than fundamentals," said Michael Field, chief equity strategist at Morningstar. "Simply put, it's loss of confidence."

Charlie Dai, VP principal analyst at Forrester, said the selloff reflects concerns that AI infrastructure spending may be "peaking faster than expected". Alphabet's announcement that it would boost its 2026 capex forecast to build new AI infrastructure has added to investor uncertainty about spending sustainability.

"Investors are reassessing whether near-term revenues can justify unprecedented AI spending levels," Dai said.

Asian markets extended the decline on Wednesday. SK Hynix closed 9.61% lower in Seoul after missing analyst estimates despite record quarterly results. Samsung Electronics fell more than 5%.

In Japan, Tokyo Electron dropped 10.59% and SoftBank Group lost 6.95%. TSMC declined 3.51% in Taiwan trading.

European chip stocks showed mixed performance, with ASML falling 1.77% and ASM International down 3.28%.

Chinese internet stocks bucked the regional weakness. Tencent and Meituan gained 4.29% and 2.05% respectively in Hong Kong trading, while Alibaba, Baidu, and Kuaishou all traded higher.

David Riedel, founder of Riedel Research Group, described the pullback as investors "giving back a little bit of the froth that was in the AI market". He said memory chipmakers "will be fine" but "just have to give back some of those sudden gains".

Aberdeen Investments sees the decline as creating opportunities to add exposure to quality businesses at more reasonable valuations.