Shares in semiconductor companies declined sharply on Tuesday amid concerns over volatile artificial intelligence (AI) investment and rising competition from Chinese chipmakers. The sell-off was led by South Korea’s two largest memory chip producers, Samsung Electronics and SK Hynix, which saw their stocks fall 7.4% and 10% respectively, contributing to a 6.25% drop in the Kospi index, one of Asia’s key benchmarks.
The downturn followed reports that Chinese memory chip manufacturer CXMT claimed a significant breakthrough in dynamic random-access memory (DRAM) technology. According to company statements, the new chip design allows for greater memory density without increasing chip size, a development that could challenge the dominance of established players such as Samsung, SK Hynix, and Micron Technology. The announcement, made at a recent industry conference, heightened investor concerns about intensified competition and the potential for margin pressure within the memory chip sector.
Globally, semiconductor stocks and related technology shares also fell. In Japan, the Nikkei 225 was down 1.8%, with notable declines in chipmaker Tokyo Electron and investor SoftBank Group, which holds a stake in ChatGPT creator OpenAI. Taiwan’s stock market saw technology shares slide nearly 2%, including a 2% drop in Taiwan Semiconductor Manufacturing Company (TSMC) shares. European chipmakers Infineon and STMicroelectronics fell by around 2% and 4%, respectively, while Dutch chip equipment supplier ASML dropped 4%. The Philadelphia Semiconductor Index, which tracks major US chip firms, decreased by 1.4%, despite moderating from earlier losses.
Contributing to the market unease were comments from Broadcom CEO Hock Tan, who likened AI investing to gambling in a casino due to excessive speculation and unclear long-term profitability. Speaking at a conference in Singapore, Tan warned that many investors lack a clear understanding of what they are investing in, with extreme expectations possibly unsustainable. He noted that AI companies like OpenAI, while showing potential with significant revenue growth, are still operating at a loss because of high training and development costs. Tan highlighted that much enterprise revenue in AI currently comes from pilot projects, suggesting uncertainty around durable earnings.
Market analysts suggested that the combined impact of higher bond yields and growing investor skepticism about AI returns was driving the chip stock sell-off. The Bank of America survey of global fund managers indicated persistent overweight positions in technology stocks, underscoring the sector’s importance to current market dynamics but also its vulnerability to profit margin scrutiny.
Meanwhile, broader market responses varied. While Nasdaq technology shares experienced modest declines, major benchmarks such as the Dow Jones Industrial Average ticked up slightly. In commodities, Brent crude oil prices dropped around 1%, influenced by geopolitical tensions in the Middle East. The movements in bond yields were modest, with the US 10-year Treasury yield edging lower amid ongoing concerns about global fiscal challenges.
Overall, the semiconductor sector’s retreat on Tuesday reflected heightened investor caution amid the interplay of emerging Chinese competition, inflation-sensitive bond markets, and the uncertain path for AI profitability. The sell-off underscored the complex dynamics facing technology investors as third-quarter earnings season commenced.