Initial Market Turmoil

Investor anxiety over the sustainability of artificial intelligence infrastructure spending has triggered a sustained selloff in AI concept stocks and chipmaker stocks across global financial markets. On Tuesday, this trend spilled over into Asian markets, causing significant declines. South Korea's Kospi index fell over 10%, while Japan's Nikkei 225 also experienced a notable drop.

South Korea Bears the Brunt

South Korea's stock market was particularly volatile during this selloff. Shares of SK Hynix and Samsung Electronics fell by approximately 10% and 12%, respectively. Given that these two companies represent roughly 40% of the total market capitalization of the Kospi, the index's early morning decline of 8% triggered a temporary trading halt. By the afternoon, the index had dropped 700 points to 6,055, bringing its cumulative decline over the past month to about 25%.

Japanese Market Follows Suit

On the same day, the Japanese stock market also suffered a steep decline, with the Nikkei 225 index falling 4.4%. Kioxia's share price plummeted 18%, while shares of semiconductor-related companies such as Lasertec, Disco, Tokyo Electron, and Renesas Electronics all saw heavy losses.

Global Contagion from Wall Street Weakness

The downturn in Asian financial markets continued the weak performance of related sectors on Wall Street. On Monday, SK Hynix's American Depositary Receipts closed down over 7% in New York. Nvidia shares also fell 5% on the same day, allowing Apple to reclaim its position as the world's most valuable publicly traded company with a market capitalization of $4.95 trillion.

Root Causes of the Selloff

Market analysts attribute this global selloff primarily to growing investor concerns about the durability of AI infrastructure spending by major technology companies. On one hand, persistently rising memory chip prices may prompt downstream customers to reduce usage or seek alternatives, thereby curbing market demand. On the other hand, the recent aggressive expansion plans of major chipmakers have sparked doubts about potential future overcapacity. It has been disclosed that SK Hynix and Samsung Electronics plan to build new chip factories in South Korea, with a total investment of 800 trillion won over the next five years. Meanwhile, Micron Technology also plans to increase its domestic investment to $250 billion.

Analyst Perspective on the Correction

Despite the market's violent fluctuations, some financial and analytical institutions maintain a positive outlook on the short-term profit prospects of the semiconductor industry. Industry analysts point out that the recent sharp gains in related stocks were too fast and too large, making a moderate correction inevitable. As market deleveraging nears its end, related capital is expected to flow back in. Relevant securities firms emphasize that long-term supply agreements have improved the visibility of corporate earnings. Additionally, the major chipmakers' efforts to expand production of high-bandwidth memory chips will substantially constrain their ability to increase output of traditional memory chips. Several investment firms also believe that the recent sharp price corrections have made some large chipmakers more attractive in terms of valuation.