Shares in Asian chip firms plunge further as AI sell-off continues

Shares in Asian chip firms, particularly in South Korea, have experienced a significant plunge for a second consecutive day. This sell-off was triggered by South Korean chipmaker SK Hynix's second-quarter results, which, despite being profitable, fell short of investor expectations. The Kospi index, heavily influenced by semiconductor manufacturers like SK Hynix and Samsung Electronics, saw substantial declines. Analysts suggest this disappointment reflects investor concerns about the sustainability of tech companies' spending on AI technology and a desire for further catalysts beyond strong earnings. The downturn has also impacted US and Taiwanese chip companies, with some investors seeking refuge in less volatile stocks like Apple. South Korea's government is reportedly considering market stabilization measures.

South Korea's Kospi share index experienced a significant decline of 8% on Wednesday, driven by sustained selling in chipmaking stocks. The downturn was primarily triggered by a sharp drop in SK Hynix shares, which fell 12.6% after the company's quarterly profit missed analyst expectations despite overall growth. Samsung Electronics also saw its shares decrease by 8%. This sell-off in South Korea's market coincided with broader declines across other Asian markets, including Tokyo's Nikkei 225, Taiwan's Taiex, and Shanghai's Composite index. The Kospi was trading at 5,547.77 by midday in Seoul.

South Korean chipmakers Samsung and SK Hynix experienced a significant sell-off, falling over 10% and contributing to the country's stock market reaching a three-month low. This decline is attributed to investor concerns regarding the substantial borrowing by AI companies for data center expansion and increased competition from China's homegrown chip-making tools. Reports indicate China has begun mass production of deep ultraviolet (DUV) chip-making tools, raising worries about the competitive standing of global leaders. Additionally, investors are reportedly uneasy about "circular funding" within the AI industry, as exemplified by discussions of Nvidia potentially financing a large data center project for OpenAI. This news also impacted Nvidia's shares, causing them to fall and the cost of insuring its debt to rise.