The Zhitong Finance App learned that on Tuesday, AI vendor stocks were intensively sold off. The analysis points out that this is the strongest signal so far, indicating that the market sentiment of this “ten-year deal” is changing — investors are beginning to worry that rising interest rates may stifle a spending frenzy that has surpassed the railroad construction boom in US history.
In the nearly four years since OpenAI released ChatGPT, a steady stream of cash has flowed into semiconductor companies, data center owners, cable companies, and any company that can share revenue from this unprecedented computing infrastructure competition. The rift in betting began in June and is now widening across markets: Last week, an Australian data center IPO collapsed, and credit investors are becoming picky about AI-related debt.
The epicenter is in Seoul: Korean stocks fell five times in a row, and sellers' side cars were triggered
The epicenter of this round of adjustments is in South Korea. South Korea's chip stock sell-off entered its fifth trading day on Tuesday and accelerated sharply — the KOSPI index closed down 5.46% to 6,035.35 points, a new closing low since August; the intraday decline widened to 6.65%, falling below the 6,000 mark.
As the KOSPI 200 futures index plummeted 5.08%, the Korea Exchange suspended the main board's programmatic sell order for 5 minutes at 9:47 a.m. local time, triggering the “sidecar” (sidecar) mechanism. This is the first time the index has been triggered since August 19, and it is another sharp fluctuation after a lapse of about two months. On the same day, net foreign sales were 4.51 trillion won (about 3.35 billion US dollars), while institutions and retail investors made net purchases of 1.69 trillion yuan and 2.23 trillion won respectively; the KOSDAQ index fell 1.43% to 837.03 points at the same time.
Weighted stocks fell sharply across the board. Samsung Electronics and SK Hynix, which are listed in Seoul, fell 10% and 8% respectively; intraday caliber showed that SK Hynix once fell by more than 10%, Samsung Electronics by about 8%, and SK Square by more than 12%. In Tokyo, memory chip maker Kioxia (Kioxia) plummeted 13%, leading the decline in the AI-related sector. This is the heaviest decline since similar stocks crashed at the end of July.
This adjustment is not limited to Seoul. In terms of US stocks, the Philadelphia Semiconductor Index, which is the AI weather vane, fell 2.7% on Monday, and the NASDAQ 100 fell 0.7%. Among them, storage indicators had the highest declines — Micron Technology (MU.US) fell 3.88%, SanDisk (SNDK.US) fell nearly 6%, and Seagate fell about 3.8%. During the Asian session on Tuesday, the MSCI Asia Pacific (excluding Japan) Index fell about 2%, and the Nikkei 225 Index fell about 2.6% to around 67,206 points, continuing its fourth consecutive decline. The Indonesian stock market once fell 2% intraday, hitting a new low since July.
Looking at it over a long period of time, KOSPI has been falling for five consecutive trading days, the longest continuous decline in more than two years, down about a quarter from the July high; the Shanghai Science and Technology Innovation Board fell by more than one-third during the same period.
South Korea's “strongest stock market” to a major withdrawal of foreign investment
Why did South Korea, which is hailed as the “best stock market” in the AI investment boom, become the first and heaviest part of this round of adjustments? The answer lies in the position structure.
According to Korea Exchange data, from the first trading day of this year (January 2) to October 12, foreign investors accumulated net sales of 199.10 trillion won in the KOSPI market, including net sales of Samsung Electronics 86.06 trillion won and SK Hynix 87.14 trillion won. Together, the two were 173.20 trillion won, accounting for 87% of total foreign net sales. According to the data, the turnover of Korean stocks plummeted by about 70% from the peak in late May, and the rate of withdrawal of foreign capital was the fastest among major Asian markets — the first half of the year was still the best-performing major stock index in the world, but since the second half of the year, it has fallen 22% cumulatively, making it the worst performing major stock index.
What made matters worse was the exit of the “Support” force. Samsung Electronics' share repurchase ended on October 6, and SK Hynix's repurchase plan will end in mid-October. As a result, market observers emphasized that whether foreign capital can return is critical to the rebound of Korean stocks.
Accelerating the sell-off is also news from a Chinese competitor. According to reports, Chinese memory chip manufacturer Changxin Storage has made progress in the next-generation DRAM design called 4F², which is expected to increase storage density, and plans to launch next-generation server products before the end of the year; IDC data also showed that Nvidia shipped 678,000 AI accelerators in China from January to June this year, a decrease of 44% over the previous year. Both pieces of news point to a premise that was previously taken for granted by the market: whether the monopoly position and demand visibility of US chip makers is really as strong as hypothetical.
Interpretation of the mechanism: The problem is not the yield, but the volatility of the bond
Damien Boey, portfolio strategist at Wilson Asset Management (Sydney), pointed out the differences between this round of adjustments and the past: “The most important development is not just the upward trend in bond yields, but the volatility of bonds... and this is beginning to spread throughout the asset pricing system.” He added, “In many ways, this is a very uncomfortable situation... Maybe AI capital spending is only cooling down slightly, and maybe a few players will fall victim to this round of adjustments.”
Marc Velan, head of investment at Lucerne Asset Management (Singapore), believes that the Korean market's “brutal day” reflects more of the cost of positions and capital, rather than a deterioration in the fundamentals of AI demand. “I suspect we are entering the next phase of the AI cycle, and the market is increasingly concerned about monetization and return on invested capital (ROIC) — I wouldn't call this the end of AI transactions,” he said. “But Korea may be an early warning of a broader reshuffle.”
The differences between the two themselves constitute the key: the market is moving from “AI narrative-driven valuation expansion” to a phase of “repricing based on cost of capital and return.”
Notably, the focus of the market's attention has changed from “how high is the yield” to “how much fluctuation is there.” For AI infrastructure assets that are highly dependent on forward cash flow discounting, every slight fluctuation in the discount rate will be amplified in terms of valuation; and when the bonds themselves begin to fluctuate violently, cross-asset passive reduction and risk budget contraction will be triggered simultaneously — this is the reason why high-foreign holdings and high-concentration markets such as South Korea are the first to put pressure on. The essence of the so-called “cruel day” is that capital is repricing risk rather than demand being falsified.
Cost of capital: From BlackRock's shift to the cold wind in the primary market
The actions of policy makers and the largest asset management institutions have provided a footnote on the “cost of capital.” On Monday, BlackRock Investment Research, a subsidiary of BlackRock, the world's largest asset management company, downgraded the US stock rating from long-term “overallocation” to “neutral,” citing “fluctuations that may occur during AI construction,” while also raising short-term US debt to “overallocated” and long-term US debt to “neutral,” and cutting its low position on Japanese treasury bonds. The report was written by strategists Jean Boivin, Li Wei, and fixed income chief investment officer Rick Reed.
BlackRock pointed out that the 10-year US Treasury yield has risen 110 basis points to about 5.25% during the year; since the beginning of the year, the market has taken into account an additional 160 basis points of Federal Reserve tightening over the next 12 months, and the agency believes this pricing has gone too far. According to its estimates, at the current yield level, the yield can rise by about 75 basis points in the next 12 months before the total return on US bonds will turn negative — this “buffer” is the basis for increasing short-term bonds. BlackRock isn't the only party turning: Rupert Harrison, a senior portfolio advisor at Pacific Investment Management Company (PIMCO), said last week that the company's bond portfolio had reached the “longest period in a long time.”
The signals for the primary market are just as direct. Last week, Nvidia-backed data center operator Firmus put on hold its $5 billion IPO in Australia due to shrinking investor interest, highlighting that risk is suddenly becoming the primary consideration for capital allocation in the sector. Last month, Japanese tech investor SoftBank issued the largest high-yield bond in history, promising up to 9.75% in its 7.5-year, $4.5 billion tier.
Another major pressure comes from energy and geography. Brent crude oil futures rose to a two-week high of around $105.9 per barrel. The rise in oil prices, along with geopolitical tension, increased concerns about inflation, and also increased the discount rate faced by long-term growth stocks — this is exactly what Boey said is a realistic footnote of “transmission from bond volatility to asset pricing”: rising financing costs, and the first to be revalued were those assets whose returns took many years to be realized.
Not One-Sided: Contradictory Evidence and Divergence Within Asia
Bearish is far from a consensus. At a series of top financial conferences held in Singapore on Monday, Broadcom CEO said capital is the biggest constraint facing growth; the International Monetary Fund (IMF) also said in its latest financial stability report that AI is contributing to growth, but “there is growing evidence that capacity investment and economic benefits may not be as great as expected,” and warned that “the consequences of AI adjustments may be global.”
But almost no one is “covering the coffin” for AI transactions. On Monday, Meta's stock price rose 3.4% due to the release of a new AI model; there was also division within Asia — India's IT sector rebounded against the trend, the Nifty IT Index rose about 3%, and HCL Technology and Tata Consulting Services (TCS) once rose 5%. Most market participants still see semiconductors as a warning sign, not the end: the AI story isn't over, but the way it's priced is changing.