Asian technology stocks collapsed Tuesday as a reported breakthrough by a Chinese memory chipmaker intensified fears of eroding pricing power, while escalating Middle East tensions sent oil prices surging past $106 a barrel.

South Korea’s benchmark KOSPI index closed down 5.5% at 6,035.35, after dropping more than 7% during morning trading. Japan’s Nikkei Stock Average fell 1.8% to 67,777.52, extending its losing streak to a fourth session.

The selloff was triggered by news that ChangXin Memory Technologies (CXMT) has made “key progress” on a new cell architecture designed to boost memory density. CXMT President Cao Kanyu disclosed the advance at an industry event in Shanghai over the weekend, according to the South China Morning Post, and said the company plans to launch products based on the structure by year-end.

Samsung Electronics, the world’s largest memory chipmaker, plunged 6.8% to close at 233,500 won despite issuing strong earnings guidance last week. Rival SK Hynix tumbled 9.1%. In Japan, Kioxia Holdings sank 13.3%, TDK lost 4.1%, and Advantest declined 2.9%.

The rout followed a broad technology selloff in New York overnight, where Micron Technology fell 3.9% and SanDisk dropped nearly 6%.

Analysts said the market reaction reflects a collision of two concerns: rising Chinese competition in memory chips and investors unwinding crowded artificial intelligence trades.

“The sell-off reflects a sharp reset in expectations, rather than a sudden deterioration in underlying AI demand,” said Song Zhe, senior investment specialist at BNP Paribas Asset Management. “We expect AI demand to remain structurally strong, but recognize that China is a serious chipmaking player. Investors need to distinguish between companies exposed to the U.S. supply chain, China’s, or both.”

Samsung and SK Hynix are developing similar cell architecture innovations, but CXMT’s timeline suggests Chinese production could reach the market sooner than expected, pressuring margins across the sector.

Geopolitical risks compounded the decline. Recent tanker attacks in the Strait of Hormuz and Houthi strikes in Saudi Arabia have disrupted key shipping lanes, pushing Brent crude above $106 a barrel. South Korea and Japan, Asia’s largest energy importers, face mounting cost pressures from the oil surge.

JPMorgan said in a Sunday report that Asian markets in 2026 are defined by an “AI vs non-AI” dynamic that will persist through 2027. The bank noted that AI exposure in Asia sits primarily in the hardware layer, concentrated in the global U.S. ecosystem across Taiwan, Korea, and parts of China.

“Sustaining the rally will require earnings delivery, even as the debate over AI monetization drives volatility,” Song said.