Asian chip stocks, especially in South Korea and Japan, experienced a sharp decline due to growing investor skepticism regarding the long-term sustainability of AI-driven growth and valuations. South Korea's KOSPI index fell by 5%, with major chipmakers Samsung Electronics Co Ltd and SK Hynix Inc plunging 7.5% and 9.2% respectively. This selloff extended losses after a weak session on Wall Street, with the Philadelphia Semiconductor Index already down approximately 19% from its June peak. Adding to the pressure were reports that Apple Inc. is exploring memory chips from Chinese suppliers, impacting sentiment toward dominant South Korean memory producers, and concerns that Meta Platforms Inc's potential cloud infrastructure business could lead to more disciplined hyperscale AI spending.
Japanese semiconductor firms also saw significant drops, with Kioxia Holdings Corp tumbling 13.3%, Ibiden Co Ltd losing 7.9%, Murata Mfg Co and Furukawa Electric Co., Ltd. each falling 7.2%, and Mitsui Mining and Smelting Co. dropping 9.6%. The Nikkei 225 declined 1.6%, although the broader TOPIX edged 0.5% higher. Taiwanese chipmakers like TSMC also came under pressure, extending recent losses as investors reassessed the high valuations of the sector following a powerful rally earlier in the year. The weakness spread after U.S. memory maker Micron Technology Inc and storage company SanDisk Corporation each fell over 10% overnight.
Despite Samsung Electronics reporting a record operating profit for another quarter, demand for high-bandwidth memory chips used in AI servers, investors are looking beyond these strong earnings. Analysts, such as Vasu Menon, Managing Director of Investment Strategy at OCBC, highlighted that investors are increasingly questioning the sustainability of record memory-chip profits and whether the enormous investment in AI infrastructure will generate sufficient returns to justify the sector's current valuations. The broad-based selling across Asia's AI hardware supply chain also saw Hon Hai Precision Industry Co Ltd decline 1.7% and Taiwan’s MediaTek Inc slip almost 3%. Mainland Chinese markets showed relative resilience, with the Shanghai Composite falling 1.9% and the Shanghai Shenzhen CSI 300 dipping 0.9%.
