Kospi plunges 10% as chip selloff spreads globally

A sweeping selloff in semiconductor stocks cascaded from Asia to the United States on Tuesday, as investors questioned the sustainability of the AI-driven chip boom and reacted to the emergence of a major new Chinese competitor in memory chips.

Asian Markets Rocked

South Korea's Kospi plunged roughly 10% on Tuesday, with Samsung Electronics and SK Hynix each shedding more than 13%. The severity of the decline triggered two separate trading halts by Korea Exchange. Japan's Nikkei 225 fell about 4%.wsj+2

The rout spread to U.S. premarket trading, where the VanEck Semiconductor ETF ↘ 3.45% lost 3% in early trading. Micron Technology ↘ 8.85% and Western Digital ↘ 6.91% were among the hardest hit, each falling roughly 5%, while Nvidia ↗ 0.25% slid another 1% after dropping 5% the prior session. Intel ↘ 5.86%, AMD Advanced Micro Devices, Inc. ↘ 8.15%, and Super Micro Computer ↘ 4.56% each fell more than 3%.qz+1

CXMT's Blockbuster Debut Fuels Fears

The selloff was amplified by the Shanghai stock market debut of ChangXin Memory Technologies, China's largest memory chipmaker. CXMT raised 57.92 billion yuan ($8.6 billion) in what became the biggest mainland Chinese semiconductor IPO, and its shares surged 466% on their first day of trading on the STAR Market. The listing pushed CXMT past a $500 billion valuation, intensifying fears that established memory makers face a well-capitalized new rival in the DRAM market.reuters+2

Investors are now questioning whether the AI infrastructure spending cycle that propelled chip stocks to extraordinary gains can withstand both rising financing costs and the prospect of Chinese competition driving down pricing power.wsj+1

A Pivotal Week Ahead

The broader sell-off arrives at a critical juncture. Earnings from Amazon Amazon.com, Inc. ↘ 0.23%, Meta Platforms ↘ 0.08%, Microsoft ↗ 1.09%, and Apple ↗ 0.94% are due later this week, and their capital expenditure guidance on AI infrastructure will be closely scrutinized. The Federal Reserve is also set to announce its rate decision on Wednesday, with markets broadly expecting no change.qz

"We see inflation expectations tame enough for comfort," said Padhraic Garvey, regional head of research for the Americas at ING, noting that yield-curve dynamics are inconsistent with a tightening cycle.qz