The AI Trade Is Deleveraging: Nasdaq-100 Nears Correction as Chip Selloff Spreads to Credit and Margin

A second straight weak session for semiconductors dragged Asian tech sharply lower, and the stress is now visible in hedge fund collateral calls and leveraged-loan pricing — not just in share prices.

July 29, 2026 Markets

A broad, index-level unwind

This is no longer a single-stock story. The Nasdaq-100 sits on the edge of correction territory as semiconductor stocks take another beating, just weeks after chips helped drive the S&P 500 and Nasdaq Composite to record highs. Wednesday's Asian session extended the damage: Samsung Electronics lost over 8%, LG Innotek fell 15%, Seoul Semiconductor dropped 10%, Kioxia was down 14%, Tokyo Electron fell 12.6%, TSMC slid 3.9%, and the Hang Seng China Semiconductor Chips Index fell more than 6%. It followed a weak U.S. tape overnight in which Intel dropped nearly 6%, AMD lost 8%, Micron and Seagate fell more than 8%, Western Digital sank nearly 7% and Sandisk shed 14% — while Nvidia itself closed flat, a sign the selling is concentrated in the capital-intensive supply chain rather than the AI bellwether.

The stress has moved into financing

The most important development is where the pain is surfacing beyond equity screens. Hedge funds are facing demands to stump up collateral as AI stocks tumble, with the scale of recent losses sparking growing risk aversion on Wall Street — a mechanical feedback loop in which losses force selling that produces more losses. Credit is repricing in parallel: a $5bn Thoma Bravo-backed refinancing for cybersecurity firm Proofpoint is drawing higher borrowing costs and tighter covenants on AI risk. Leveraged ETFs tied to SK Hynix are getting hammered, compounding the squeeze on retail-held bullish bets. Aberdeen's Kieron Poon attributes the Korean weakness partly to "the ongoing deleveraging process in Korea" — read across the three, and this looks like positioning unwinding faster than fundamentals are deteriorating.

Dispersion inside the selloff

The tape is discriminating, which argues against a wholesale AI de-rating. Chinese internet names listed in Hong Kong bucked the regional weakness — Tencent rose 4%, Meituan 2.49%, with Alibaba, Baidu and Kuaishou all higher — even as Chinese semiconductor names sold off hard. Seagate's June-quarter results beat Wall Street expectations and the stock rallied after hours, welcome news for a battered AI trade. Both Aberdeen and Riedel Research Group's David Riedel read the drawdown as valuation reset rather than fundamental breakdown, with Riedel calling it investors "giving back a little bit of the froth" and Poon saying the pullback "created opportunities" to add quality exposure at better prices.

Space stocks: a separate unwind

Not every high-multiple selloff traces back to AI. Space stocks are falling hard on concerns that defense spending may be near a peak, particularly if control of Congress becomes divided — a policy-driven de-rating distinct from the chip deleveraging above, and one that a single company's launch cadence doesn't explain.

Sources

Not investment advice.