The July 28, 2026 Global Chip Selloff: How Circular AI Fears, China's DUV Breakthrough, and NAND Oversupply Wiped Out Billions

The broader Topix index fell 2.52% to 3,963.59 . Other reports placed the Topix decline at 2.3% to around 3,973 . The divergence — the Nikkei falling nearly 4% while the Topix fell roughly 2.3–2.5% — reflects the price-weighted Nikkei's outsized exposure to a few expensive chip stocks.

Concentrated Selling in Nikkei Semiconductor Heavyweights

Selling fell hardest on the high-priced semiconductor names that dominate the price-weighted Nikkei 225 . Key stocks hit by significant declines included Advantest, Tokyo Electron, and Kioxia, with Kioxia plunging 18% and SoftBank dropping over 6% as the sector faced a new wave of selling . Tokyo Electron dropped more than 9%, and Advantest slid over 8% .

Nvidia's Reported $250 Billion OpenAI Talks and 'Circular' AI Fears

Over the weekend of July 25–26, the Wall Street Journal reported that Nvidia is in talks to provide a roughly $250 billion financing backstop for OpenAI to help the ChatGPT maker lease a 10-gigawatt data center project developed by SoftBank's energy subsidiary . Nvidia was also separately involved in financing $350 billion of OpenAI's purchases of its own chips, part of a broader set of deals worth more than $750 billion .

These reports reignited 'circular AI' fears — the concern that Nvidia is effectively lending money to OpenAI so OpenAI can buy Nvidia chips, inflating demand without genuine end-user revenue to justify it . The circular-deal structure had been flagged earlier in 2026 by Bloomberg as a key risk underpinning the AI boom . On Monday, July 27, Nvidia fell 5% on Wall Street , and by Tuesday the narrative had spread to Asian markets.

China's Mass Production of Domestic DUV Lithography Equipment

On July 27, a report by The Information revealed that a Shanghai-based, state-backed company had begun mass-producing immersion deep ultraviolet (DUV) lithography machines, a critical chipmaking tool long dominated by Dutch supplier ASML . The machines are expected to be delivered this year to leading Chinese chipmakers including SMIC, Hua Hong, and CXMT .

The report hit ASML shares hard (down ~6.8%) and dragged U.S. semiconductor equipment makers Applied Materials, Lam Research, and KLA Corp sharply lower . By Tuesday's Asia session, the news compounded the selloff as investors reassessed the competitive threat to Western and Japanese chip-equipment makers .

NAND Oversupply and Memory-Chip Pressure

Memory chip stocks were already under severe pressure before July 28. On Monday, SanDisk plunged 11% and Micron fell sharply, with the Philadelphia Semiconductor Index dropping 4.2% . South Korean memory giants were hammered again on Tuesday: SK Hynix slumped 11% and Samsung Electronics tumbled more than 8% . The rout was deepened by concerns that Chinese memory maker CXMT (ChangXin Memory Technologies) was ramping production just as NAND oversupply was already weighing on pricing .

Broader AI Infrastructure Return Concerns

A Bloomberg gauge of Asian semiconductor shares slumped as much as 7.5% on Tuesday . The selloff reflected mounting investor questions about whether massive capital expenditures on AI data centers would produce adequate returns . Nasdaq 100 futures dropped 1% in pre-market U.S. trading . The circular-funding concern — that AI demand was being manufactured by chipmakers lending to their own customers — was the underlying narrative tying all the triggers together: the Nvidia-OpenAI deal, the China DUV breakthrough (which threatens the equipment makers' pricing power), and the memory glut (which signals demand may be weaker than supply chains assumed) .