Japan, South Korea stocks slide as AI fears hit chipmakers

Stocks in Tokyo and Seoul fell in early trading on Monday, October 19, after a selloff in U.S. technology shares. Japan's Nikkei 225 lost more than 1.7% and South Korea's Kospi was down more than 1%, while SoftBank Group dropped 4.43%, TradingKey reported. Investors are increasingly worried about how much money artificial intelligence (AI) needs and when that spending will pay off, and those worries are now moving from Wall Street into the two Asian markets most exposed to chipmakers.tradingkey.com

Chip stocks lead the decline

The Kospi opened more than 3% lower before recovering part of the loss. In Japan, losses grew after the Nikkei opened only slightly lower, according to TradingKey. South Korea's two largest chipmakers, Samsung Electronics and SK Hynix ↘ 6.58%, both fell. In Tokyo, memory maker Kioxia slipped along with SoftBank, TradingKey reported. Later in the morning, both indexes were down about 2%. Electronic components maker Taiyo Yuden and silicon wafer maker Sumco ↗ 0.32% were among the Nikkei's biggest losers, NDTV Profit reported.ndtvprofit.com+1

Monday's losses followed a rough week. The Nikkei fell 5.4% last week and South Korean stocks dropped more than 14%, Reuters reported via The Economic Times. On October 13, the Kospi fell 5.46% in a single session, its biggest drop in months. Some investors were worried that Chinese memory chipmakers are catching up, SBS reported.economictimes.indiatimes.com+1

Wall Street's AI worries

In the previous U.S. session, the S&P 500 fell 1.09% and the Nasdaq Composite dropped 2.15%. Both indexes had their worst week in almost four months. CoreWeave ↘ 11.91% fell more than 10% and Oracle ↘ 4.64% lost nearly 5%, TradingKey reported. The Philadelphia Semiconductor Index PHLX Semiconductor Index ↘ 3.84% fell 11.4% last week, its longest losing streak since 2008, according to Reuters.tradingkey.com+1

"Investors have long worried that AI revenues won't be sufficient to recoup the massive upfront investment," My Bui, an economist at AMP, told Reuters. Bui added that higher bond yields and wider credit spreads are "making it harder to borrow, refinance, and keep the AI infrastructure build-out going."economictimes.indiatimes.com

Earnings week ahead

Some areas held up better. U.S. stock futures rose and MSCI's broadest index of Asia-Pacific shares outside Japan eased only 0.3%, helped by lower oil prices, Reuters reported. Australia's S&P/ASX 200 edged higher, according to NDTV Profit.ndtvprofit.com+1

Investors are now looking to this week's earnings reports. Meta ↘ 3.72% reports on Wednesday, October 21, and Lam Research ↘ 4.87%, Texas Instruments ↘ 0.95% and Tesla ↘ 2.13% also report this week. According to Reuters, Goldman Sachs The Goldman Sachs Group, Inc. ↘ 1.12% expects five large AI cloud companies to spend about $1.2 trillion combined on capital projects next year.economictimes.indiatimes.com