On November 5, the global chipmaking sector witnessed a sharp drop in market value as investor worries about the inflated valuations of tech stocks reached new heights. The cumulative market value lost by the Philadelphia Semiconductor Index on Tuesday and the Asian chip stock index on Wednesday totaled a staggering approximately $500 billion. This significant decline serves as a clear indicator that the recent surge in semiconductor stocks, propelled by the artificial intelligence (AI) craze, has veered into overvalued territory.

Since hitting their lows in April, chipmakers' market values have collectively soared by trillions of U.S. dollars, primarily driven by soaring expectations for AI computing demand. However, the current market correction underscores mounting concerns about the industry's profitability prospects and its inflated valuations, especially in the face of the potential for prolonged high-interest-rate environments. Chris Weston, the Head of Research at Pepperstone Group, commented that the market currently paints a rather bleak risk picture, with the possibility of further downward adjustments looming large. He added that, at present, there are scant reasons for investors to jump into the market and buy.