Semiconductor Stocks Pare Losses as Chinese AI Competition Concerns Ease

Ticker movements: MU -0.51% | AMD +0.84% | SNDK +4.95% | NVDA +3.04% | ^SOX +0.06%

Semiconductor stocks trimmed early losses on Monday, with the PHLX Semiconductor Index (SOXX) recovering from a decline of more than 2% as the broader market rallied and the sector shook off initial concerns about intensifying AI competition from China.

US-listed shares of memory and storage leaders Micron Technology (MU) and SK Hynix (SKHY) fell less than 1% and 2%, respectively. Both companies are key suppliers of high-bandwidth memory (HBM), a critical component in AI accelerators that has become a significant growth driver as Nvidia and other chipmakers scale production. AI chip heavyweight Nvidia (NVDA) gained 3% after falling as much as 1% earlier in the session. AMD (AMD) also reversed an early-morning decline to rise more than 1% ahead of its earnings report later this week — a result investors will be watching for updates on the company's data center and AI GPU pipeline. Intel (INTC), along with Marvell (MRVL) and Qualcomm (QCOM), also edged higher.

Catalyst Behind the Initial Selloff

The early pressure on semiconductor shares followed Alibaba's (BABA) unveiling of its most powerful AI model to date, Qwen3.8-Max. Separately, a research firm noted that the latest model from China-based AI developer DeepSeek is more than 100 times cheaper to run than Anthropic's (ANTH.PVT) Claude Fable 5.

These developments underscore the intensifying competition among Chinese technology firms to build advanced AI systems that deliver both capability and affordability, even as US export controls continue to restrict Chinese companies' access to the most advanced AI chips.

The Open-Weight Debate

Chinese AI companies are increasingly betting that open-weight AI models will provide developers with greater access and flexibility compared to the closed-source approach favored by OpenAI, Anthropic, and Alphabet's (GOOG, GOOGL) Google. Open-weight releases allow developers to download and modify model parameters freely, a fundamentally different distribution model from the API-based access that leading Western AI labs monetize through subscriptions and enterprise contracts. This debate has drawn significant attention across Silicon Valley in recent weeks.

Broader Context for Chip Stocks

Semiconductor equities have been central to the AI investment theme this year, driving the sector to a record high in June. Since then, chip stocks have slid into bear-market territory, declining more than 20% from their peaks as investors have grown increasingly cautious about the massive AI capital expenditure programs underway at hyperscaler companies. The sustainability of those spending programs — and the revenue they generate for chip suppliers — remains the central question for semiconductor valuations, with AMD's upcoming results among the next data points.

Concerns about China's rapid progress in AI, particularly through the development of lower-cost models, have also weighed on the broader AI infrastructure trade.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.