[New York Stock Exchange] Tech Stocks Hit by Alibaba AI Chip Development... Nasdaq Down 1.15%

Alibaba Develops and Tests Next-Generation AI Chip In-House
Tech Stocks Fall Amid Concerns Over Decreased Demand for AI Chips

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The three major stock indexes on the New York Stock Exchange declined together on August 29 (local time). Technology stocks fell as concerns spread over a potential decrease in U.S. AI chip demand following news that Chinese e-commerce company Alibaba had developed its own next-generation artificial intelligence (AI) chip.

On August 29 (local time), the Dow Jones Industrial Average closed at 45,544.88, down 92.02 points (0.20%) from the previous trading day. The Standard & Poor's (S&P) 500 Index fell 41.60 points (0.64%) to 6,460.26, and the Nasdaq Composite Index dropped 249.61 points (1.15%) to 21,455.55 at the close.

Alibaba is currently developing and testing a next-generation AI chip in-house. While Alibaba’s previous AI processors were manufactured by TSMC, the company has now reached the stage of producing them independently.

Other Chinese technology companies are also intensifying efforts to develop products to replace Nvidia’s H20 chip, further cooling investor sentiment toward technology stocks.

Previously, the Chinese government began requiring that more than half of the computing chips in publicly owned data centers be supplied by Chinese companies. If Alibaba and other Chinese firms begin producing high-performance AI chips, it could pose a challenge for U.S. technology companies.

On this day, Nvidia and Broadcom shares fell by more than 3%. The Philadelphia Semiconductor Index also declined by more than 3%. TSMC, ASML, AMD, Arm, Lam Research, and Micron Technology each saw declines of around 3%. In contrast, the price of Alibaba’s American Depositary Receipts (ADR) listed on the New York Stock Exchange surged by 13%.

Despite the correction, optimism persisted in the market. Chris Zaccarelli, Chief Investment Officer (CIO) at Northlight Asset Management, stated, "September is typically the weakest month of the year, but there doesn’t appear to be any factor that could break the current bull market," adding, "If volatility arises in September or October, it is likely to present a good buying opportunity."

The U.S. Personal Consumption Expenditures (PCE) Price Index for July, released on the same day, matched expectations and did not have a significant impact on the stock market. The U.S. Department of Commerce announced that the core PCE Price Index, which excludes volatile food and energy prices, rose 0.3% in July from the previous month. Compared to the same period last year, it increased by 2.9%.

The overall PCE Price Index rose 0.2% from the previous month and 2.6% year-on-year. Both figures were in line with market expectations.

Among technology companies with a market capitalization of over 1 trillion dollars, all declined except for Alphabet. Alphabet, which has recently been recognized for its strong technological capabilities in the AI industry, set another all-time high on this day.