Global technology and semiconductor stocks experienced a significant sell-off this week, raising questions about the sustainability of the AI-driven market rally. The downturn was triggered by a sharp 6.6% drop in Broadcom (AVGO) shares on Tuesday, driven by renewed investor concerns over compressed profit margins in its custom AI chip business. This decline echoed similar margin warnings from December, highlighting the trade-off between rapid revenue growth and profitability.
The sell-off rippled through Asian markets on Wednesday, with Japan's Nikkei 225 falling 0.5% as semiconductor-related stocks like Lasertec and Tokyo Electron declined. The weakness was not isolated to hardware, as a new AI automation tool from Anthropic sparked a fresh wave of selling in global software stocks. A Goldman Sachs basket of US software stocks fell 6%, its worst day since April, with Asian IT services firms like Tata Consultancy Services and Infosys also seeing sharp declines.
Amid the volatility, a major potential deal emerged. Nvidia is reportedly nearing an agreement to invest roughly $20 billion in OpenAI as part of the ChatGPT maker's latest funding round, which aims to raise up to $100 billion. This would be Nvidia's single largest investment to date and signals continued massive capital flows into core AI infrastructure, even as the market reassesses valuations. However, Nvidia also faces uncertainty, with reports that its H200 chip sales to China have been delayed due to a U.S. national security review.
Investors are now focused on key upcoming data points, including Broadcom's fiscal Q1 results on March 4, 2026, for clarity on margin guidance and customer demand. The events underscore a market in transition, balancing explosive AI growth with fundamental financial metrics and geopolitical factors.
