The Zhitong Finance App learned that on Tuesday, Asian technology stocks experienced a new round of systematic sell-off. The US semiconductor sector weakened overnight and spread to the Asia-Pacific market. Market concerns about Chinese memory chip manufacturer Changxin's breakthroughs in storage technology brought about increasingly fierce competition, AI capital expenditure returns, and the financing environment were concentrated.
According to the data, the South Korean and Japanese stock markets both experienced sharp declines. South Korea's Kospi Index plummeted by about 6%, and the Nikkei 225 Index fell more than 2%. Investors are speeding up the withdrawal of AI and memory chip stocks that have performed well this year during the key earnings season and before US inflation data is released.
In the Korean market, the stock price of SK Hynix (SKHY.US) plummeted by more than 8% in the intraday period, and Samsung Electronics fell 7.9%, both of which hit the lowest intraday level since August. Earlier, it was reported that Changxin Storage is making progress in a new generation of technologies to increase memory density and is considering launching server memory products based on this structure before the end of the year. The news heightened market concerns about the competitive landscape, pricing power, and profit margins of memory chips.
Pepperstone analyst Chris Weston pointed out that China continues to narrow the competitive gap with US companies in the supply chain of AI models, humanoid robots, memory, and other technologies, and its ability to develop more competitive products at a lower cost is challenging the market's assumptions about the durability of share, pricing power, and profit margins.
Japanese tech stocks are also under pressure. The SoftBank Group declined by about 8%, leading the decline in Japan's semiconductor and electronics sector due to its high exposure to the global AI industry. Kioxia plummeted by more than 12%, Tokyo Electronics and Renesas Electronics by about 6%, and Edwin Test, Lasertec, and Disco by about 5%. Taiwan Semiconductor Manufacturing Company (TSM.US) fell nearly 2%, dragging Taiwan's stock market down more than 2%. Hong Kong, mainland China, Australia, and New Zealand stock markets also recorded significant declines.
AI emotions are “vulnerable”
This round of sell-off took on Wall Street's overnight weakness. The Nasdaq Composite Index fell 0.44% on Monday, Micron Technology (MU.US) fell nearly 4%, and SanDisk (SNDK.US) fell 6%. The global technology sector had just slowly recovered from the summer slump. That round of adjustments erased trillions of dollars in market capitalization due to high valuations and uncertain timing of the return on huge AI investments.
Vey—Sern Ling, senior stock advisor at UBP Bank, said that investors are nervous and are looking for excuses to make a profit on AI-related stocks that have performed well this year, especially memory stocks.
Phillip Wool, chief market strategist at Rayliant Global Advisors, believes that Changxin Storage's breakthrough is an important milestone for Chinese chipmakers, showing that it has overcome technical limitations and may challenge established companies earlier than expected; however, the market reaction is not proportional to direct competitive threats, because Changxin Storage has not demonstrated large-scale production capacity, and its market share still lags behind Samsung and SK Hynix.
He stressed that the current discussions do not even involve HBM, and that South Korean chipmakers still occupy an undisputed dominant position in this field, and it is foreseeable that the future will hardly be threatened by manufacturers such as Changxin Storage. Therefore, he is more inclined to interpret this sharp decline as a sign that AI sentiment is very weak at the moment, and warns that fluctuations may continue as investors re-evaluate chip demand and semiconductor manufacturers maintain pricing power.
At the same time, the sustainability of the AI business model is once again in the spotlight. Broadcom (AVGO.US) CEO Hock Tan (Hock Tan) compared recent investors' enthusiasm for investing in AI to gambling, saying “many investors don't know what they are investing in”. They set extreme expectations, but in the end, they discovered that it was almost like being in a casino.
He also warned that the industry has yet to find a sustainable model, and mentioned that ChatGPT developer OpenAI has reported losses of billions of dollars. Chen Fuyang said that OpenAI is still losing money because of huge training expenses. Other than providing cutting-edge generative AI models, which have significant potential revenue growth, it is impossible to explain more at this stage.
According to reports, OpenAI reported annual revenue of 50 billion US dollars in September. This is seen as a sign that the business model is viable, but the long-term guarantee is limited.
Pepperstone's Weston added that the financing requirements behind AI construction are becoming an increasingly important consideration for investors, especially at a time when capital intensity and future return issues are becoming more prominent. The CEO of Intel (INTC.US) previously warned that even if demand for computing infrastructure continues to exceed supply, capital acquisition channels may become a major headwind for the AI boom. Traders are watching the financial reports of major technology companies for this month and next, as well as US inflation data to determine the AI industry outlook and interest rate path; interest rates are generally negatively correlated with growth stocks.
In addition to this, the situation in the Middle East and the oil market have also received attention. Several powerful explosions occurred in Riyadh on Monday evening local time. Earlier, the Houthis recently launched a series of attacks on Saudi capital airport, killing at least 18 people.
A Houthi official warned the US on Monday that it would face a “painful response” if it got involved in the war in Yemen; earlier reports claimed that Saudi Arabia requested Washington to help deal with the organization. The civil war in Yemen was reignited in July. The Saudi-led military alliance supported the government against the Iran-backed Houthis. The wider regional conflict has disrupted the energy market and brought the Middle East into crisis.
The Houthis quickly targeted Saudi oil facilities, tankers, and transportation hubs, including a series of fatal attacks on Riyadh Airport, which impacted the world's largest oil exporter. Despite this, the two major crude oil contracts fell more than 1% on Tuesday, but Brent crude continued to stay above $100, putting continued upward pressure on global inflation.