Asian technology stocks, particularly those in the semiconductor sector, tumbled following a fresh rout in U.S. chip shares, triggered by concerns over the sustainability of AI spending and lofty valuations. TSMC, despite posting a sharp jump in profit and increasing its full-year capital expenditure forecast to between $60 billion and $64 billion, saw its shares fall by 3.64%. This decline reflected investors' focus on worries that aggressive industry investment might be increasingly difficult to justify.
The sell-off extended across the region, with shares of SoftBank dropping 9.2%, chip equipment maker Tokyo Electron losing 9%, and Advantest sliding 9.4%. SK Hynix, whose shares closed over 11% lower on Thursday, saw its U.S.-listed shares slump over 13%. Kioxia, a Japanese memory chipmaker, plunged over 14% after being ordered to pay $229 million in damages for patent infringement. This downturn is seen as an unwinding of crowded AI momentum trades rather than a deterioration in long-term fundamentals, according to strategist Andrew Jackson of Ortus Advisors.
Several analysts are raising concerns about the concentration and valuation risks in markets with heavy exposure to AI-related stocks, such as Taiwan and South Korea. For instance, TSMC accounts for nearly 42% of Taiwan's benchmark index, while TSMC, Samsung Electronics, and SK Hynix together make up over half of the KOSPI's market capitalization. Investors are increasingly questioning whether the surge in AI-related shares, which have seen months of outsized gains, can be sustained, despite TSMC's 77% surge in net profit and a planned additional $100 billion investment in the U.S.
