Chip stocks slide in US and Asia as AI jitters rattle investors

Chip Stocks Decline in US and Asia Amid AI-Related Market Movements

Shares of major semiconductor companies fell sharply in trading across the United States and Asia as selling in stocks linked to artificial intelligence continued. On Tuesday morning, trading on South Korea’s benchmark Kospi index was halted temporarily after an 8% drop. The index declined further once the 20-minute pause ended and closed 10.8% lower.

The losses were concentrated in technology companies. Samsung Electronics and SK Hynix each dropped more than 13%. The move followed a 5% decline in Nvidia shares in New York on Monday, after which the company lost its position as the world’s most valuable listed company to Apple.

The Kospi has triggered its circuit breaker mechanism several times this year. The rule is intended to limit panic selling. The index more than doubled from the start of the year to mid-June before losing roughly one-third of its value. Trading in South Korea has been volatile in recent months because of high participation by retail investors.

On Monday, US-listed shares of SK Hynix fell 7.5% and traded below the $149 offer price set at its Nasdaq debut on 9 July. Japan’s Nikkei 225 index, which also has heavy technology weighting, closed nearly 4% lower.

Jane Sydenham, investment director at Rathbones, said the Asian declines followed “phenomenal rises” in recent months. She noted that the Korean market is concentrated, with large holdings in Samsung and SK Hynix. Many Korean investors buy shares with borrowed money, which can amplify price moves during corrections, she added.

The sell-off began after Nvidia shares declined on a Wall Street Journal report that the company was in talks to provide about $250 billion to OpenAI for a large data-centre project. The BBC contacted Nvidia and OpenAI for comment.

The drop allowed Apple to overtake Nvidia as the most valuable listed company. Apple shares have risen about 25% this year. Cheng Chye Hsern, head of investments at Providend, said Apple is one of the few large technology companies not participating in the current wave of AI-related capital spending, which some investors view as a positive factor given the scale of data-centre outlays by competitors.

Sydenham said spending on AI infrastructure has periodically tested investor sentiment in recent months, with questions about whether the outlays will generate adequate future returns. Jun Bei Liu, founder of Ten Cap, said investors are also watching rising competition from Chinese chip makers and have taken some profits, though many are expected to return to the sector after the US holiday period.

Shares of ChangXin Memory Technologies, China’s largest memory chip maker, rose nearly 470% on their Shanghai debut on Monday. The company said most of the IPO proceeds will be used to expand production capacity and fund research and development. CXMT manufactures dynamic random-access memory chips used in AI data centres, mobile phones, personal computers, tablets and other devices.

European markets opened higher on Tuesday and showed little immediate reaction to the AI spending concerns. The UK’s FTSE 100, France’s CAC 40 and Germany’s DAX 40 each rose about 0.6% in early trading. These indexes have comparatively lower exposure to AI-related companies than markets in Asia and the United States.