South Korea's KOSPI crashes 8% as chip stocks tumble
What's the story
South Korea's KOSPI index plummeted by nearly 8% on Tuesday, triggering a temporary suspension of program trading. The fall was led by major chipmakers Samsung Electronics and SK Hynix, whose shares fell by up to 9.5% and 11.1%, respectively. The sector-wide sell-off comes as investors are pulling back from AI-related stocks over fears of financing risks associated with AI infrastructure spending and rising competition from China.
Market fears
Rising competition from China intensifies investor concerns
The sell-off in South Korean chip stocks is fueled by concerns over AI infrastructure financing and China's technological advancements.
Han Ji-young, an analyst at Kiwoom Securities, said reports of Chinese firms developing domestic deep ultraviolet (DUV) lithography machines have sparked fears that they could ramp up capacity expansion.
This would intensify competition in the global memory market, further cooling investor sentiment toward semiconductor stocks.
AI funding
NVIDIA's potential financial backstop for OpenAI raises concerns
A Wall Street Journal report that NVIDIA could provide a roughly $250 billion financial backstop for an OpenAI data center project has also weighed on market sentiment.
The news sent NVIDIA shares down nearly 5%, as investors questioned how much of its own customers' financing the AI chip leader may be providing.
This further added to the concerns over AI infrastructure financing and its impact on semiconductor stocks.
Market developments
Low-cost Chinese AI models and memory-chip competition impact sentiment
The growing popularity of low-cost Chinese open-source AI models such as Kimi K3 has raised questions about future demand for advanced AI chips and HBM.
Meanwhile, the strong stock-market debut of Chinese memory-chip maker CXMT has fueled fears of intensifying competition in the global memory industry.
These developments have further contributed to the sector-wide sell-off in South Korean chip stocks amid fears over financing risks associated with AI infrastructure spending and rising competition from China.