Scared by tech’s debt deluge, investors are questioning the AI boom

July 29, 2026 — 12:07pm

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Investors’ love affair with all things artificial intelligence seems to be wavering. Shares in the hyperscalers and chipmakers are tumbling around the world, while costs of their rapidly-increasing debt levels are rising.

It’s not one thing that is prompting investors and lenders to moderate their enthusiasm for AI, but a range of questions that have been hardened by recent developments.

In just over a month, the Philadelphia Semiconductor Index, regarded as the global barometer for the tech hardware sector, has lost more than 25 per cent of its value. The Nasdaq Index is down more than 8 per cent and the “Mag7” index of the biggest technology stocks more than 10 per cent.

South Korea’s main market index, the semiconductor giants-driven Kospi, fell more than 10 per cent on Tuesday and has now lost more than a third of its value in the past five weeks.

In Europe, ASML, the world’s key maker of chip-manufacturing equipment – and the only company producing the machines that make the most advanced chips - has lost nearly 20 per cent of its market value this month.

When even the momentum within the ‘picks and shovels’ tech stocks reversing, – despite quite robust earnings – it is apparent investors are becoming nervous about the sustainability of the three-and-a-half-year bull market in AI-related stocks.

The AI bull market was vulnerable to even the slightest setback, given how far and how hard it had run.

There are some old fears resurfacing.

There have been lingering concerns about the circularity of the financing deals AI companies have done to fund the training of their models and the chip purchases and data centre commitments that underpin their pursuit of agentic AI. Beyond the nature of those deals, there is also increasing concern of the scale.

Then there’s another concern that, in pursuing ever more advanced models and the holy grail of artificial general intelligence, or human-level cognitive........

© The Sydney Morning Herald