Rocky week for AI as shares slump but no sign of crash – yet

The stock market started souring on artificial intelligence last week, triggering a global selloff that has extended into this week. The downturn began on 22 June with Alphabet, which suffered its worst day on the market in over a year after a slew of high-profile leaders announced departures from Deepmind, Google's elite AI research unit. A day later in South Korea, shares of chipmakers Samsung and SK Hynix dropped by double digits. Investors worried about both companies' $500bn spending plans and signs of weakening demand for their high-bandwidth memory products from other players in the AI sector. The two companies make up half of the value of South Korea's Kospi Index, much like seven companies make up 30% of the S&P 500 in the US — meaning they can tilt the entire stock market and economy. Their precipitous drops last week triggered a halt on trading. In the US, the downturn may seem to spell doom, but it represents only a minor decline in comparison with the chip sector's gains this year. The share price of some chip companies has tripled, or more, since January, driving entire stock markets sharply higher in Asia. Warnings of a cataclysmic AI-induced crash have not come true yet, though. As my colleague Graeme Wearden reports, the Kospi index is up 125% this year, its strongest first half since at least 19… “Is this the beginning of the end for AI, the bubble popping? I don't think so,” said Blake Montgomery, US tech editor at the Guardian. Should the selloff of chip stocks continue, it may pop the ballooning global investment in AI. However, that will require a panic far more severe than what we've seen so far.