The semiconductor industry is facing a fresh wave of sell-offs, with pressure on global chip stocks intensifying on Tuesday.

A Bloomberg index of Asian semiconductor stocks once plunged 7.5%, marking its largest single-day drop since early March, following an overnight decline in their US counterparts.

As investors offload positions in this year's biggest AI winners, the MSCI AC Asia Pacific Index is heading for a technical correction. South Korea's Kospi index closed sharply lower, down 11% on Tuesday, triggering a 20-minute trading halt. Both Samsung Electronics and SK Hynix fell more than 13%.

The sell-off highlights how quickly sentiment is shifting on one of the market's hottest trades. Investors are increasingly questioning whether high valuations and the unprecedented wave of AI spending can be sustained. The cost to protect Nvidia debt from default saw its largest single-day increase on Monday.

Dilin Wu, a research strategist at Pepperstone Group Ltd, noted that the surge in Nvidia credit default swaps suggests the credit market is picking up on something the stock market has not yet fully reflected.

Shares of chip equipment makers, including Nikon Corp and Tokyo Electron Ltd, each fell more than 10% on Tuesday.

With several global tech giants set to report earnings this week, the broad market decline at the start of the week indicates a lack of confidence. The spending plans of companies like Meta Platforms Inc and Amazon will be critical for the future direction of share prices.

Hebe Chen, senior market analyst at Vantage Global Prime, stated that the latest sell-off in chipmaker stocks shows market doubts about spending, returns, and valuations are deepening, not fading. As several major catalysts approach, investors are reluctant to buy the dip, suggesting they are waiting for more concrete evidence before re-establishing positions.