Nasdaq futures drop 240 points as China chip fears hit tech stocks

Nasdaq 100 futures slid 0.83%, or about 240 points, on Tuesday after reports of a Chinese lithography breakthrough deepened concerns about the cost of the artificial-intelligence buildout, while Dow futures gained 145 points in a stark rotation out of technology stocks.

"China appears to have used innovation to circumvent U.S. export restrictions, and they are doing more with less," said Harvey Robinson, tech analyst at Panmure Liberum, in a phone conversation.

The divergence was stark: Dow futures rose 0.28%, while S&P 500 futures edged 0.10% lower. The selling followed a report by The Information that three Chinese companies — Semiconductor Manufacturing International Corp., Hua Hong Semiconductor and CXMT — had made significant advances in deep ultraviolet lithography machines, a technology long dominated by ASML Holding NV. ASML shares fell more than 10% this week in Amsterdam.

The development threatens the investment thesis for the "picks and shovels" trade that has powered the AI rally, as cheaper Chinese alternatives could reduce the need for the massive capital expenditure that chip makers have been banking on. SK Hynix Inc. reports second-quarter results Wednesday, followed by Samsung Electronics Co. on Thursday, with both companies having outlined plans to double production capacity over the next two years.

The selloff extended a four-day rout that has wiped out more than $1.2 trillion from U.S. technology stocks including Nvidia Corp., Tesla Inc. and Alphabet Inc. In Asia, the damage was more severe. South Korea's Kospi index plunged almost 11%, triggering circuit breakers for the ninth time in 2026. SK Hynix tumbled 14%, Samsung Electronics lost 13% and Japan's Kioxia Holdings Corp. sank 18%, halving its market value in a month.

The Philadelphia Semiconductor Index had already been in correction mode, with sharp losses for Micron Technology Inc. and other chip makers on Monday. SK Hynix's American depositary receipts indicated a further 4% decline to around $137 in premarket trading Tuesday.

The Chinese breakthrough centers on DUV lithography machines that, while still behind ASML's state-of-the-art equipment, can approach comparable efficiency at a much lower cost. CXMT's record-breaking flotation in Shanghai on Monday underscored investor enthusiasm for China's push toward semiconductor self-sufficiency. The company raised capital at a valuation that reflected the market's bet on domestic chip production capabilities.

The rout also raises questions about the valuation of memory-chip makers. Both SK Hynix and Samsung trade at just three times earnings forecasts for the end of 2027, according to FactSet, reflecting deep concern about the cyclicality of semiconductor earnings. SK Hynix raised $29 billion earlier this month through Nasdaq-listed depositary receipts to fund its capital expenditure commitments.

The divergence between the Dow and the Nasdaq signals a potential regime shift in equity markets, with investors rotating out of AI-exposed names into value-oriented sectors. The coming earnings reports from SK Hynix and Samsung this week will provide the first major test of whether the market's growth assumptions for chip makers remain intact.

This article is for informational purposes only and does not constitute investment advice.