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South Korean and Japanese tech took another battering Tuesday, leading losses across most Asian stock markets, as a report of a breakthrough in China’s chip industry compounded growing worries about the longevity of the AI boom.
The losses extended a sell-off across the industry globally following an eye-watering rally over the past two years that has sent several indexes and companies to record highs.
They also overshadowed a more upbeat outlook over the Middle East conflict as the United States and Iran paused tit-for-tat strikes for a third day and Donald Trump suggested there was a “good chance” of a deal to end hostilities.
Semiconductor firms were at the forefront of a region-wide rout Tuesday after website The Information said China’s Shanghai Yuliangsheng had started mass production of a chipmaker technology long dominated by Dutch firm ASML.
Seoul-listed SK hynix and Samsung lost around a tenth of their value, dragging the Kospi index down more than eight percent and sparking a 20-minute circuit-breaker.
The two firms have lost around 40 percent since hitting all-time highs last month, while the Kospi is down more than 30 percent.
Tokyo’s Nikkei tanked more than four percent at one point as Kioxia shed 15 percent, while Advantest and Tokyo Electron dived 10 percent.
Taipei was also off more than three percent as market heavyweight and chip giant TSMC took a hit.
There were also losses across most other markets, though Hong Kong was the standout as its tech firms enjoyed some much-needed buying following a painful first half of the year.
Tuesday’s hammering followed a bleak day on Wall Street, where the Philadelphia Semiconductor Index dropped 2.2 percent as Sandisk tanked 11 percent, while Advanced Micro Devices and Nvidia gave up around five percent.
ASML shed more than 8 percent in Amsterdam.
The AI trade was already fracturing in recent weeks owing to worries about the vast sums that had been invested in AI, which had fuelled questions about when that would actually begin seeing a return, while extended valuations had also raised eyebrows.
“The immediate fundamentals of semiconductors have not collapsed,” wrote Stephen Innes at SPI Asset Management.
“Demand for high-bandwidth memory remains strong, hyperscalers are still spending, and the largest technology companies have not yet abandoned their capital expenditure plans.
“What has changed is the market’s willingness to capitalise those promises at almost any price.
“The AI trade spent the past several years behaving like a flywheel: rising equity values encouraged more spending, more spending validated higher earnings expectations, and those expectations pushed valuations higher again.
