AI sell-off intensifies as investors dump chip stocks amid bubble fears and circular financing concerns

AI stock sell-off continues as investors dump chipmakers

An AI stock sell-off continued on Tuesday as markets in Asia tumbled, with trading on South Korea's Kospi temporarily halted after it plunged 8 per cent and Tokyo sliding 4 per cent. Shares in SK Hynix shed as much as 10 per cent, while its larger rival, Samsung Electronics, fell more than 9 per cent. The two companies account for about 40 per cent of the South Korean stock market, giving them an outsized influence. The declines come after SK Hynix, the world's second-largest memory-chip maker, fell sharply in New York on Monday. Its American depositary receipts closed more than 7 per cent lower at $143 -- $6 lower than when they started trading earlier this month. The Seoul-listed shares of SK Hynix have now fallen about 45 per cent since hitting a record high above Won3mn ($2,041) in June, wiping about $570bn off its market value and marking one of the world's steepest declines over the period, second only to SpaceX. The shares had tripled earlier this year before peaking. SK Hynix's "stock has gone up too much, too fast this year, so this kind of correction is inevitable", said Chan H Lee, managing partner at Petra Capital Management, a Seoul-based hedge fund. "But we are likely to see a rebound soon as deleveraging is almost done and global funds will flow in again once they think the correction is complete." The Kospi's Tuesday decline meant the index has fallen by about 25 per cent over the past month and is down by a third from its June peak. It remains 46 per cent higher for the year to date, however. Japan's stock market also fell sharply on Tuesday. The Nikkei 225 dropped more than 4 per cent as chip stocks declined, with Kioxia plunging as much as 18 per cent. The broader Topix was down closer to 3 per cent. Traders in Tokyo have been shocked by the speed of the move, blaming rising interest rates for triggering an unwinding of momentum and retail-driven positions. "I can't remember seeing anything this bad or violent," said one senior equities trader. Kioxia, the Japanese memory chip company, has plunged 50 per cent in the past month. The group, which was taken private in 2018 by a Bain Capital-led consortium that included SK Hynix, had briefly been Japan's biggest company by market value. Other semiconductor-related stocks, including Lasertec, Disco, Tokyo Electron and Renesas, were also sharply down on Tuesday. The Nikkei 225 is now down almost 15 per cent since hitting a high of more than 72,000 points in June. The sell-off reflects growing investor doubts about the durability of Big Tech spending on AI infrastructure. Although SK Hynix is expected to post another quarter of record earnings on Wednesday, investors fear that soaring memory prices could eventually curb demand as customers seek to reduce usage or switch to cheaper alternatives. Concerns over future oversupply have also weighed on sentiment after South Korea's leading chipmakers recently unveiled aggressive expansion plans. SK Hynix and Samsung plan to build two new chip plants apiece in South Korea as part of a combined Won800tn ($530bn) investment to double their production capacity for DRam chips over five years. US rival Micron Technology has also raised planned domestic investment to $250bn to the end of 2035. Analysts expect SK Hynix on Wednesday to report second-quarter operating profit of about Won64tn, up sevenfold from a year earlier, with revenue more than tripling to roughly $57bn. Despite the market jitters, analysts remain positive on the industry's near-term outlook, citing long-term supply agreements that improve earnings visibility. "Their capacity to increase conventional memory chips will be limited as they expand [high-bandwidth memory chip] production next year," said KB Securities analyst Kim Dong-won, expecting sales to Big Tech companies and data-centre operators to account for 70 per cent of the company's revenue, up from 30 per cent in 2017. Some analysts said the recent sell-off has made SK Hynix shares increasingly attractive, trading at just 4.4 times forward earnings, below Micron's 6.2 times. Shawn Oh of NH Investment & Securities said in a note that the recent pullback has made SK Hynix a "compelling buy", citing its attractive valuations and ongoing deleveraging among Korean retail investors.

Investors ditch chip stocks as fears of AI bubble grow

Once again, fears of an AI investment bubble are rattling investors. Earlier, trading on South Korea's stock market had to be halted after a steep sell-off. The latest bout of nerves is being caused by news that chip giant Nvidia is investing three-quarters of a trillion dollars to help fund artificial intelligence infrastructure projects. Sceptics call this 'circular financing', where a supplier invests money in its customers, artificially inflating demand. South Korean shares slumped 10 percent, led by chip maker SK Hynix and tech giant Samsung, which dominate the market there.

Chip firms fall in US and Asia as AI jitters rattle investors

Shares in major chip firms have fallen sharply in the US and Asia as a sell-off in artificial intelligence-related stocks deepened. Trading on South Korea's benchmark Kospi index was paused temporarily on Tuesday morning after sliding by 8%. It fell further after the 20-minute halt was lifted to trade around 10% lower. The slump was led by technology firms, with Samsung Electronics and SK Hynix both falling by more than 10%. It comes after AI chip giant Nvidia fell by 5% in New York on Monday, meaning it lost its position as the world's most valuable listed company to Apple. The tech-heavy Kospi has been halted eight times so far this year under a stock market mechanism known as a circuit breaker, which is designed to calm panic selling. The index had more than doubled from the start of the year to mid-June but has since lost around a third of its value. In recent months, stock market trading has been particularly volatile in South Korea as it has attracted large numbers of retail investors. On Monday, US-listed shares in SK Hynix fell by 7.5% to well below the $149 offer price when it made a record-breaking debut on the Nasdaq on 9 July. Japan's Nikkei 225, which is also dominated by tech companies, was almost 4.5% lower on Tuesday morning. Nvidia shares fell on Monday after the Wall Street Journal reported that it is in talks to provide around $250bn for OpenAI as part of a massive data-centre project. The BBC has contacted Nvidia and OpenAI for comment. The decline allowed Apple to overtake Nvidia as the world's most valuable company after the iPhone maker rose by about 25% this year. As governments and companies spend hundreds of billions of dollars on developing AI capabilities, some analysts have questioned whether the technology can become profitable enough to recoup such huge investments.

AI sell-off intensifies as investors ditch chip stocks

Samsung and SK Hynix fall by more than 10% amid renewed fears over AI spending and Chinese competition The sell-off in AI stocks has intensified, driving South Korea's stock market down to its lowest level in three months. Investors continued to ditch chip stocks on Tuesday, amid rising concerns about the huge amount of borrowing among AI companies to fund their datacentre expansion plans. The South Korean semiconductor companies SK Hynix and Samsung Electronics fell by more than 10%, dragging the country's Kospi share index down to its lowest point since mid-April. Analysts attributed the sell-off to renewed worries over AI investment spending, and competition from cheaper Chinese companies, after a report by the Information that China has begun mass production of homegrown deep ultraviolet(DUV) chip-making tools. "We believe the market was likely spooked by the progress of China's chip-making equipment capabilities, and was worried that this progress would threaten the competitive position of global chip making and chip equipment leaders," said Jing Jie Yu, an equity analyst at Morningstar, adding that the sell-off was "largely a kneejerk reaction and overdone". On Monday, shares in the Chinese memory chip maker CXMT rose by 466% when it floated on the Shanghai stock exchange, underlining China's drive to create its own AI supply chain. Investors may also be growing jittery about the "circular funding" at the heart of the AI industry, through which artificial intelligence firms finance one another. On Monday, the Wall Street Journal reported that Nvidia was in discussions with OpenAI about providing $250bn (£188bn) for a massive datacentre project in Ohio. Backing from Nvidia, which has an investment grade credit rating, could make it less expensive to raise funding for the project. News of the talks knocked Nvidia's shares on Monday; they closed 5% lower, while the cost of insuring the chip company's debt against default using a credit default swap (CDS) rose. "The market reaction to the Nvidia news was swift. Nvidia fell 5% and closed the session below the $200-per-share mark. More importantly, Nvidia's five-year CDS spiked, suggesting that it may not yet be the right time to buy the dip," said Ipek Ozkardeskaya, a senior analyst at Swissquote.

AI sell-off deepens as chip stocks slump in market retreat - business live

Stock markets are tumbling in Asia, as an AI sell-off pushes investors to dump some of the biggest chip stocks in the industry. The South Korean Kospi dropped more than 10% on Monday, with trading halted at one point, and Japan's Nikkei fell more than 4%. Shares in the chip companies SK Hynix and Samsung Electronics both fell by more than 10%. It follows a rough day of trading in the US too - SK's US-listed shares dropped 7% on Monday, and chip designer Nvidia dropped 5%, giving Apple back its top spot as the world's biggest listed company. Investors are growing increasingly fearful of the huge amount of borrowing among AI companies - and a report from the FT last night highlighted that prices for credit default swaps ( a tool to bet against corporate debt) tied to the likes of Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom and Nvidia have risen to record highs in recent days. Jim Reid, of Deutsche Bank, says markets are "caught between a new sell-off in chipmakers and the positive news that the US-Iran pause from over the weekend would continue as both sides negotiate in talks." This meant that the S&P 500 (+0.02%) and Nasdaq (-0.16%) were little changed yesterday after an initial rally, whilst the Philly Semi Stock Exchange Index (-2.23%) fell further. The equity performance also wasn't helped by new highs in real yields, though nominal 10yr Treasury yields (-2.8bps) came down as Brent crude fell -8.70% yesterday, in its largest decline since April. It is an additional -2.0% lower this morning, trading at $86.59/bbl, after being at $101 on Friday morning. S&P 500 (-0.22%) and Nasdaq (-0.74%) futures are lower this morning. The AI sell-off also comes even after a flying market debut for the Chinese chip company CXMT, which joined Shanghai's stock exchange on Monday and surged by more than 400% in its first day of trading.

Global Market: Samsung, SK Hynix plunge up to 11% as investors reassess AI chip boom

South Korean chip stocks experienced sharp declines on Tuesday. Major companies like Samsung Electronics and SK Hynix saw significant drops. Investors scaled back artificial intelligence-related bets due to spending sustainability worries. Concerns over China's semiconductor advancements also fueled market unease. This selloff reflects a broader reassessment of AI valuations and future demand. South Korean semiconductor stocks tumbled on Tuesday, with major chipmakers Samsung Electronics and SK Hynix witnessing sharp declines as investors scaled back artificial intelligence-related bets amid growing concerns over the sustainability of AI infrastructure spending and rising competition from China, Reuters reported. Samsung Electronics shares fell as much as 9.5%, while SK Hynix dropped as much as 10.9%. The broader benchmark KOSPI was trading 7.3% lower as of 0032 GMT, reflecting a broad-based selloff across the technology sector. According to Reuters, the decline followed a series of developments that renewed investor concerns about the durability of the AI-driven semiconductor rally, which has lifted chip stocks globally over the past year. SK Hynix, a key supplier of high-bandwidth memory (HBM) chips used by Nvidia for advanced AI computing systems, has been among the biggest beneficiaries of surging demand for AI infrastructure. However, its strong exposure to the AI theme has also made the stock more vulnerable to shifts in investor sentiment. The company's U.S.-listed shares had already come under pressure overnight, closing at $143.02, below their initial public offering price of $149. Analysts cited a combination of factors behind the selloff, including concerns over AI infrastructure financing, China's semiconductor advancements and intensifying competition in the global memory chip market. Investor sentiment weakened after a Wall Street Journal report suggested Nvidia could provide a financial backstop of around $250 billion for an OpenAI data-centre project. The report pushed Nvidia shares down nearly 5% as investors questioned whether the AI chip leader could be taking on greater financial exposure by supporting its customers' infrastructure expansion, Reuters said. Meanwhile, reports of China making progress in developing domestic deep ultraviolet (DUV) lithography technology added to market concerns. Such advancements could help China reduce dependence on Western semiconductor equipment suppliers despite restrictions imposed by the United States on access to advanced chip technologies. Investors were also watching the rise of lower-cost Chinese open-source AI models, including Kimi K3, which raised questions about whether future AI workloads would require the same level of computing power previously anticipated. A potential moderation in AI demand could affect future requirements for advanced processors and high-bandwidth memory chips. Adding to concerns, Chinese memory chipmaker CXMT delivered a strong debut in Shanghai, fuelling worries about increasing competition in the global memory semiconductor industry. Reuters also reported that investor unease was heightened by reports that Apple had been lobbying the Trump administration to permit the use of Chinese-made chips in some of its products, further intensifying concerns about China's growing semiconductor capabilities. The sharp decline in South Korean chip stocks highlights a broader reassessment among investors over AI-related valuations, funding models and the long-term outlook for semiconductor demand after a prolonged rally driven by expectations of rapid AI adoption.

Asian chip stocks slide as China competition fears rattle AI trade

SEOUL, July 28 (Reuters) - Asian semiconductor stocks tumbled on Tuesday, with South Korea leading the regional selloff, as investors questioned lofty valuations amid concerns over AI infrastructure financing and intensifying competition from China. Shares in memory-chip giants Samsung Electronics and SK Hynix plunged as much as 13.4% and 14%, respectively, amplifying the decline in Seoul. Together, they account for nearly half of the benchmark KOSPI index, which was down about 9.4% as of 0341 GMT. Japanese flash memory-chip maker Kioxia Holdings slumped nearly 18%, while Taiwanese chip designer MediaTek fell more than 9% in morning trade. SK Hynix's U.S. shares closed 7.5% lower overnight at $143.02, the first time below their $149 initial public offering price since debuting this month, highlighting how quickly sentiment has turned against one of the biggest beneficiaries of the AI boom. "We seem to be at the despair part of the selloff, where tech investors are rushing for the exit because the Nasdaq says so," said Matt Simpson, a senior analyst at StoneX. "But right now the KOSPI is setting the tone for sentiment in Asia, and it looks ugly." AI SENTIMENT SHIFTS SK Hynix, a key supplier of high-bandwidth memory (HBM) chips to Nvidia, has been one of the biggest beneficiaries of the AI spending boom, making its shares particularly sensitive to shifts in investor sentiment toward the sector. Analysts said the selloff reflected a combination of concerns over AI infrastructure financing, China's technological advances and rising competition from Chinese firms. Han Ji-young, an analyst at Kiwoom Securities, said reports that Chinese companies were developing domestic deep ultraviolet (DUV) lithography equipment had reignited concerns that Chinese memory-chip makers could accelerate capacity expansion, intensifying competition in the global memory market. While details such as the companies involved, equipment performance and commercialisation timelines had yet to be disclosed, the news had cooled investor sentiment as the investment narrative for semiconductor stocks had already weakened, he said. Han added that investors were becoming increasingly cautious ahead of a string of earnings reports due later this week. "Despite stronger-than-expected earnings from Samsung Electronics earlier this month and Alphabet last week, semiconductor shares experienced sharp declines after the results," he said. Separately, a Wall Street Journal report that Nvidia could provide a roughly $250 billion financial backstop for an OpenAI data-centre project sent Nvidia shares down nearly 5%, with investors questioning the extent to which the AI chip leader may be financing its own customers. Further weighing on sentiment, the growing popularity of low-cost Chinese open-source AI models such as Kimi K3 raised questions about whether future AI workloads could prove less intensive than previously expected -- meaning less demand for advanced AI chips and HBM. CXMT IPO COULD INTENSIFY COMPETITION Chinese memory-chip maker CXMT's strong stock-market debut on Monday added to concerns about intensifying competition in the global memory industry. "CXMT is going to be one of the big index weights. As that's going on, people have to dump more of their existing stocks," said Hao Hong, managing partner and chief investment officer at Lotus Asset Management in Hong Kong. The listing also reinforced concerns that CXMT could emerge as a more formidable memory supplier, increasing the risk of oversupply and weaker pricing, said Ryu Young-ho, a senior analyst at NH Investment & Securities. The CXMT listing came after reports that Apple had been lobbying the Trump administration to allow the use of Chinese-made chips in some of its products, further unsettling investors already concerned about China's growing technological capabilities. (Reporting by Heekyong Yang in Seoul; Additional reporting by Ankur Banerjee and Gregor Stuart Hunter in Singapore; Editing by Kevin Buckland and Jamie Freed)

Asian Equities Slide on Growing Doubts Over AI Spending

Asian equities slid Tuesday morning, with Korean markets leading losses amid growing worries over spending linked to the artificial-intelligence boom. Chip and technology stocks dragged stock markets lower across Asia after the U.S. Philadelphia Semiconductor Index fell 2.2% on Monday, extending a selloff into a third straight session and taking the index's cumulative loss over the period to more than 7%. "Sentiment toward the semiconductor sector was also hit by a report that a Chinese state-backed company had begun mass-producing deep ultraviolet lithography chip-making equipment, potentially increasing competition with foreign suppliers," Commerzbank Research analysts said in a note. Technology news publication The Information reported that a Shanghai-based company had started making a homegrown version of machines that are used in chip manufacturing. South Korea's Kospi led declines across the region, falling 7.7%, with chip-making index heavyweights SK Hynix slumping 11% and Samsung Electronics dropping 8.7%. Korea Exchange briefly suspended trading in both the main Kospi index and the tech-heavy Kosdaq. Japan's Nikkei Stock Average declined 3.8%, with memory-chip manufacturer Kioxia Holdings sliding 15% and semiconductor manufacturing equipment maker Kokusai Electric falling 12%. Singapore's FTSE Straits Times Index shed 0.5%, Malaysia's FTSE Bursa Malaysia KLCI lost 0.3% and China's Shanghai Composite Index was down 0.9%. Meanwhile, Hong Kong's Hang Seng Index rose 0.4%. "Investors remain concerned about the scale of AI-related spending and whether the rapid increase in [capital expenditure] would translate into sufficient returns," the Commerzbank analysts said. Meanwhile, crude oil futures fell Tuesday as the pause in the U.S.-Iran conflict continued. President Trump told reporters aboard Air Force One on Monday that there was a "good chance that something good could happen" with Iran. Trump had paused a major escalation in the military campaign against Iran amid efforts to revive diplomacy to open the Strait of Hormuz and a debate over the impact of declining munitions stocks, The Wall Street Journal reported. "The resumption of oil exports out of the Caspian Pipeline Consortium terminal on Monday after being closed last week, added another point of relief for oil markets," said John Oh, sustainable and energy economist at Commonwealth Bank of Australia, in a note. Front-month West Texas Intermediate crude oil futures fell 0.9% to $81.84 per barrel and front-month Brent crude oil futures dropped 0.7% to $87.76 a barrel, ICE data showed.