US Chip Stocks Slump Pre-Market: Micron Falls Over 5%, AMD and Intel Drop More Than 4%

TradingKey - On July 28, Eastern Time, the US semiconductor sector continued to face pressure in pre-market trading. Micron Technology ( MU) fell over 5%, while AMD ( AMD) and Intel ( INTC) both dropped more than 4%, indicating that capital continues to withdraw from memory chip and artificial intelligence concept stocks that have seen significant recent gains.

Micron's pre-market stock price chart, Source: FUTUBULL

This round of decline was primarily driven by intensifying semiconductor competition in China. Shares of Chinese DRAM manufacturer ChangXin Technology surged on their listing debut, prompting the market to reassess the competitive landscape of the global memory chip industry. Investors worry that after securing massive financing, ChangXin will accelerate its capacity expansion and may engage in more intense price and market share competition with Micron, Samsung Electronics, and SK Hynix in the commodity DRAM market in the future.

Meanwhile, reports indicating that Chinese enterprises are pushing forward with the mass production of domestic Deep Ultraviolet (DUV) lithography equipment have sparked market concerns that China's enhanced chip manufacturing capabilities could undermine the long-term competitive advantages of US and European semiconductor companies. Impacted by the news, the Philadelphia Semiconductor Index slid by approximately 2% at one point in the previous trading session, with chip stocks such as AMD, Micron, and Nvidia generally trading lower. Asian chip stocks suffered a selloff in tandem on Tuesday, with Samsung Electronics plunging 13% and SK Hynix tumbling 14%, further dampening sentiment in US pre-market trading.

In addition to competitive pressures from China, investors also harbor concerns over the high construction costs of AI data centers and whether the massive capital investments by tech companies can be translated into profits in a timely manner.

In the short term, the semiconductor sector still faces pressure from valuation pullbacks and profit-taking. The market will next focus on the earnings and AI capital expenditure guidance of large tech companies such as Microsoft ( MSFT ), Meta ( META) and Amazon ( AMZN) and other large tech companies' earnings reports and AI capital expenditure guidance. If cloud computing companies continue to expand chip purchases, stocks like Micron and AMD may find support; if capital expenditures fall short of expectations, correction pressure on chip stocks could intensify further.