Wall Street’s Chip Selloff Goes Global

Summary of Wall Street’s Chip Selloff Goes Global

by The Wall Street Journal

12m•July 28, 2026
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Overview of Wall Street’s Chip Selloff Goes Global

This episode of What's News focuses on a global rout in chip and AI-related stocks, driven by rising doubts about the sustainability of massive AI spending and increasing concerns that China is closing the technology gap. The show also covers U.S. politics and foreign policy developments, including Trump’s shifting view of Ukraine, pressure on election rules ahead of the midterms, Mitch McConnell’s extended absence, Johnson & Johnson’s talc settlement, and worsening conditions for foreign automakers in China.

Global Chip and AI Selloff

What triggered the decline

  • U.S. chip stocks fell sharply, with NVIDIA down about 5%, and the selloff spread to Asian markets.
  • Japan’s Nikkei fell nearly 4% and Korea’s market saw a double-digit drop, prompting trading halts.
  • Investors are rethinking how much value is justified by the AI boom and whether current spending levels are sustainable.

Main concerns behind the selloff

  • AI buildout economics: Investors worry hyperscalers may keep spending heavily while margins and free cash flow weaken.
  • Circular financing fears: Reports that NVIDIA could help finance OpenAI-related data center spending fed concerns about self-reinforcing AI investment loops.
  • Rising Chinese competition: New reports suggested China may be making progress in both chip production and the tools used to make advanced chips.
  • A Chinese chipmaker, CXMT, is highlighted as a fast-rising competitor that could pressure margins across the industry.

Market takeaway

  • The market’s enthusiasm for chips and AI remains high, but expectations are also extremely elevated.
  • With major earnings from Meta, Microsoft, Amazon, and Apple arriving this week, investors are bracing for more evidence on whether AI spending is boosting growth or simply burning cash.

Ukraine, Trump, and Shifting White House Tone

  • Volodymyr Zelensky is in Washington to meet President Trump.
  • Trump’s view of Ukraine appears to have improved, with reports that he is more impressed by:
    • Ukraine’s drone warfare capabilities
    • Its ability to defend against Shahed drones
  • Despite the friendlier tone, the key question is whether this will lead to actual policy changes.

What Ukraine wants

  • More Patriot interceptor missiles to defend against Russian ballistic missile attacks.
  • U.S. support for a partial ceasefire involving a halt to long-range strikes on infrastructure.

Broader foreign policy note

  • Trump is also expected to speak with Benjamin Netanyahu about the war in Iran.
  • Washington is pushing diplomatic efforts to keep the Strait of Hormuz open, while Iran is reportedly seeking greater control and possibly transit fees.

U.S. Politics: Voting Rules and McConnell’s Health

Trump’s election push

  • The administration is pressuring the Supreme Court to allow new federal restrictions on mail-in ballots and voter eligibility lists.
  • Trump is also urging Senate Republicans to cancel the August recess and pass the Save America Act, a strict proof-of-citizenship voting bill.

Mitch McConnell’s absence

  • McConnell’s staff say he is still in rehab and not ready to return to the Capitol.
  • He has now been absent for 40 days, fueling health speculation.
  • If he remains out, Republicans may face complications on:
    • intelligence and justice nominations
    • Pentagon funding related to the Iran conflict

Johnson & Johnson Talc Settlement

  • Johnson & Johnson agreed to pay $5.5 billion to settle remaining lawsuits claiming its talc products caused ovarian cancer.
  • The deal is intended to end more than a decade of litigation.
  • J&J shares rose in after-hours trading.
  • The settlement is conditioned on 95% of remaining claimants participating.

Foreign Automakers Struggle in China

Mercedes, Porsche, and the broader slowdown

  • Mercedes-Benz reported a 30% drop in China sales.
  • Porsche has cut another 5,000 jobs, reflecting deeper pressure in the Chinese market.
  • Luxury brands are being hit by:
    • weaker Chinese real estate and the resulting wealth effect
    • softer demand for high-end imports
    • increasing competition from domestic Chinese automakers

Why the market is changing

  • Chinese brands like BYD have overtaken legacy foreign leaders in key segments.
  • Foreign automakers are increasingly concluding that China is no longer a reliable market for export-only or import-heavy strategies.

Emerging strategy: China as an export base

  • Some companies, including Ford, GM, and Volkswagen, are trying to use China as an export platform for other regions.
  • But exporting Chinese-built cars to the U.S. is becoming harder because of political opposition and restrictions on Chinese software in vehicles.
  • The most realistic opportunity may be in Latin America, Southeast Asia, the Middle East, and other emerging markets.

Earnings Calendar to Watch

The episode closes by flagging a heavy earnings day, including reports from:

  • Coca-Cola
  • UPS
  • Boeing
  • Visa
  • Mondelez
  • Ford

Key Takeaways

  • The AI and chip trade is under pressure as investors question whether the boom is overextended.
  • China is increasingly seen not just as a market risk, but as a competitive technology threat.
  • Trump’s tone on Ukraine has softened, but major policy shifts are still uncertain.
  • U.S. politics remains tense around voting rules and Senate scheduling.
  • Global automakers are being forced to rethink their China strategies as local competitors strengthen.