Asian chip stocks slide as China competition fears rattle AI trade

By Heekyong Yang and Gregor Stuart Hunter

SEOUL/SINGAPORE, July 28 (Reuters) – Asian semiconductor stocks tumbled on Tuesday, with South Korea leading the regional selloff, as investors questioned lofty valuations amid concerns over AI infrastructure financing and intensifying competition from China.

Shares in memory-chip giant Samsung Electronics closed 13.4% lower, notching their worst one-day fall in almost two decades, while SK Hynix dropped 14.7%, amplifying the Seoul market rout. Together, the two companies account for nearly half of the benchmark KOSPI index, which closed down 10.8%, marking its biggest one-day decline since the early days of the U.S.-Iran conflict in March.

Japanese flash memory-chip maker Kioxia Holdings slumped 18.3%, while Taiwanese chip designer MediaTek fell almost 10%.

SK Hynix’s U.S. shares closed 7.5% lower overnight at $143.02, the first close below their $149 initial public offering price since debuting this month, highlighting how quickly sentiment has turned against one of the biggest beneficiaries of the AI boom. The company is due to report earnings on Wednesday, the first since its Nasdaq listing.

“We seem to be at the despair part of the selloff, where tech investors are rushing for the exit because the Nasdaq says so,” said Matt Simpson, a senior analyst at StoneX. “But right now the KOSPI is setting the tone for sentiment in Asia, and it looks ugly.”

AI SENTIMENT SHIFTS

SK Hynix, a key supplier of high-bandwidth memory (HBM) chips to Nvidia, has been one of the biggest beneficiaries of the AI spending boom, making its shares particularly sensitive to shifts in investor sentiment toward the sector.

Analysts said the selloff reflected a combination of concerns over AI infrastructure financing, China’s technological advances and rising competition from Chinese firms.

Han Ji-young, an analyst at Kiwoom Securities, said reports that Chinese companies were developing domestic deep ultraviolet (DUV) lithography equipment had reignited concerns that Chinese memory-chip makers could accelerate capacity expansion, intensifying competition in the global memory market.

While details such as the companies involved, equipment performance and commercialisation timelines had yet to be disclosed, the news had cooled investor sentiment as the investment narrative for semiconductor stocks had already weakened, he said.

Han added that investors were becoming increasingly cautious ahead of a string of earnings reports due later this week.

“Despite stronger-than-expected earnings from Samsung Electronics earlier this month and Alphabet last week, semiconductor shares experienced sharp declines after the results,” he said.

Separately, a Wall Street Journal report that Nvidia could provide a roughly $250 billion financial backstop for an OpenAI data-centre project sent Nvidia shares down nearly 5%, with investors questioning the extent to which the AI chip leader may be financing its own customers.

Further weighing on sentiment, the growing popularity of low-cost Chinese open-source AI models such as Kimi K3 raised questions about whether future AI workloads could prove less intensive than previously expected — meaning less demand for advanced AI chips and HBM.

CXMT IPO COULD INTENSIFY COMPETITION

Chinese memory-chip maker CXMT’s strong stock-market debut on Monday added to concerns about intensifying competition in the global memory industry.

“CXMT is going to be one of the big index weights. As that’s going on, people have to dump more of their existing stocks,” said Hao Hong, managing partner and chief investment officer at Lotus Asset Management in Hong Kong.

The listing also reinforced concerns that CXMT could emerge as a more formidable memory supplier, increasing the risk of oversupply and weaker pricing, said Ryu Young-ho, a senior analyst at NH Investment & Securities.

The CXMT debut came after reports that Apple had been lobbying the Trump administration to allow the use of Chinese-made chips in some of its products, further unsettling investors already concerned about China’s growing technological capabilities.

However, some investors said there was nuance about which regional semiconductor companies would compete directly with CXMT.

“We see threats to Asian chipmakers from this news as more of a long-term story,” said Cameron Systermans, head of multi-asset for Asia at Mercer Investments in Tokyo. “CXMT is a genuine and rising competitor but in commodity DRAM, while it’s still likely years behind its Korean competitors in HBM.”

(Reporting by Heekyong Yang in Seoul and Gregor Stuart Hunter in Singapore; Additional reporting by Ankur Banerjee in Singapore; Editing by Kevin Buckland and Jamie Freed)