Why did SK Hynix and Nvidia stock drop on AI circular financing fears
A proposed $250 billion Nvidia-OpenAI backstop rattles Asian chip markets and revives dot-com comparisons
Investors are treating Nvidia's own money as a warning sign. A deal meant to secure Nvidia's future demand is instead reading as proof that AI's financing has become dangerously self-referential.
The expectation going into this cycle was that chip demand looked unshakeable. That confidence cracked fast once the terms of a new arrangement surfaced.
Nvidia and OpenAI are discussing a backstop of up to $250 billion to help fund a data center campus in Pike County, Ohio. The scale of that figure alone was enough to spook a market already primed for signs of overextension. South Korea's Kospi index dropped 7% on heavy selling of chipmaking stocks, according to Reuters. SK Hynix, a key supplier tied to AI memory demand, plunged 13% in Seoul. Nvidia shares themselves dropped nearly 5%, dragging chip stocks lower as renewed worries about circular AI financing spread across markets.
The structure of the deal is what unsettled analysts most. MarketWatch reported analysts warning the potential arrangement would revive a spooky tech-bubble habit, where a chipmaker effectively funds the customer that buys its own chips. Jim Cramer went further, warning that AI's circular financing frenzy echoes the dot-com bubble, a comparison that lands hard given how that era ended.
None of this proves the AI buildout is fake demand. But when the company selling the picks and shovels is also bankrolling the mine, investors are right to ask who is actually paying for growth. The sell-off in Seoul shows that question is no longer confined to Silicon Valley boardrooms. It has become a market-moving concern from Ohio to Korea, and the size of the numbers involved means the scrutiny on AI financing arrangements is unlikely to fade quietly.
