Chip Stocks Plunge After Samsung Misses Expectations and Chinese AI Firm Develops Own Chip

Within less than 24 hours, the semiconductor sector on Wall Street faced two major shocks. First, Samsung Electronics reported strong earnings but failed to meet the high expectations set by investors, triggering a sharp sell-off. Shortly after, Reuters revealed that Chinese AI company DeepSig is developing its own AI chip, intensifying pressure on chip stocks globally.

Samsung's earnings report led to an unusually steep 11% drop in its shares on the Seoul Stock Exchange, dragging down other Asian chip stocks such as SK Hynix, which fell about 6%, contributing to a nearly 5% decline in South Korea's KOSPI index. The news about DeepSig’s chip, aimed at the inference stage of AI models to reduce reliance on Nvidia and Huawei chips, caused Nvidia’s stock to fall at the Wall Street open despite the project being in early stages.

DeepSig is known for disrupting the AI industry in January 2025 by launching a cost-effective AI model, which previously wiped out hundreds of billions in Nvidia’s market value in a single day. The combination of these two events sparked aggressive sell-offs worldwide, with European chipmaker ASML losing around 5%, and US chip stocks, including Nvidia, retreating from record highs, increasing volatility in the Philadelphia Semiconductor Index (SOX).

The turmoil also affected Israeli chip companies, with Tower Semiconductor dropping about 4.9%, and Nova and Camtek each losing over 8%. These developments mark a shift in investor focus from rapid growth and future promises to scrutinizing potential erosion of competitive advantages, supply chain changes, and slowing demand growth in the AI chip sector.

According to Reuters, DeepSig has been working on its chip project for about a year, expanding its engineering team quietly and negotiating with partners in chip design, manufacturing, and memory. While these events do not signal a weakening of the AI revolution, they highlight a new market phase where investors demand more concrete signs of sustainable growth and competitive positioning.