Shares in Asian chip firms plunge further as AI sell-off continues
Shares in Asian semiconductor companies fell sharply for a second consecutive day after South Korea's SK Hynix posted quarterly results that, despite being record profits, fell short of investor expectations. The sell-off underscores growing unease about whether the enormous spending by technology firms on AI infrastructure can be sustained, with the memory chip sector having become central to the AI investment boom.
Seoul's Kospi index, dominated by chipmakers, fell as much as 12.6% on Wednesday, following an 11% slump the day before, marking a record two-day decline of over 40% from its peak roughly a month earlier. SK Hynix shares dropped as much as 16%, while Samsung Electronics fell nearly 10%; the two firms together make up more than half the Kospi's market value. Japan's Nikkei slid 1.5%, Taiwan's TSMC fell 3%, and US chipmakers including Intel and AMD also declined, while Apple's stock rose towards a $5tn valuation as investors sought safer assets. Analysts noted that retail investors using borrowed money, who had driven the earlier rally, were now exacerbating the sell-off, prompting South Korea's finance minister to say the government was reviewing market stabilisation measures.
In short
- Asian chip stocks slump further after SK Hynix results disappointed investors
- Kospi's two-day fall exceeds 40% from its recent peak
- South Korea's government reviewing market stabilisation measures
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Market observers contend that the sell-off reflects justified repricing of unrealistic expectations. Record profits missing elevated forecasts suggest the AI infrastructure boom had been overestimated and valuations had decoupled from sustainable growth rates. This correction, whilst painful, performs an essential market function: forcing participants to reassess assumptions and preventing bubbles from inflating further. Government interference would artificially prop up valuations that no longer reflect fundamentals and encourage future speculative excess.
The case against
Investors counter that this decline reflects panic rather than reasoned reassessment. The underlying firms posted record profits, demonstrating healthy fundamentals; merely missing expectations by some margin is ordinary market variation, not evidence of a broken thesis. The sell-off is being compounded by margin calls forcing retail investors to liquidate positions regardless of long-term value. Government stabilisation measures would address genuine market dysfunction—the feedback loop of forced selling—without distorting valuations or preventing necessary long-term repricing.
Explained simply
Memory chips are the electronic components that store data in computers and other devices. They have become central to the artificial intelligence boom because AI systems require vast amounts of memory to operate effectively. Companies like South Korea's SK Hynix and Samsung Electronics, Japan's TSMC, and US firms such as Intel have seen extraordinary demand from technology companies building AI infrastructure, making semiconductor firms some of the world's most valuable companies.
The sell-off reflects mounting questions about whether technology firms can justify their enormous spending on AI infrastructure. SK Hynix reported record profits, but investors had expected even higher earnings, suggesting concerns that the voracious demand for AI-related chips may not be sustainable indefinitely. This disappointment spread across global markets as investors reassessed whether the AI investment boom can continue at its current pace.
The sharp declines have been amplified by the behaviour of retail investors who borrowed money to buy these shares when prices were rising steeply. As sentiment turned negative, these leveraged investors were forced to sell, accelerating the downward spiral. The speed and scale of the decline—particularly in South Korea, where chipmakers dominate the stock market—has prompted government officials to consider stabilisation measures.
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