Key facts
- Asian stock markets, particularly chipmakers, experienced a significant sell-off on Tuesday.
- Concerns over China's semiconductor self-reliance push and the financial demands of AI development fueled investor jitters.
- South Korea's Kospi and Japan's Nikkei indices saw substantial declines, with circuit breakers triggered in South Korea.
- Major chip manufacturers Samsung Electronics, SK Hynix, Kioxia, and TSMC all experienced sharp drops in their stock prices.
- China's CXMT Corp., a new chip stock, saw its shares fall after a massive debut surge, but retained most of its gains.
- Reports indicate China is domestically producing chipmaking machines, signaling a move away from foreign suppliers.
Asian stock markets, particularly technology and chip-related shares, experienced a sharp decline on Tuesday. Investors are grappling with concerns over China's increasing efforts toward semiconductor self-reliance and the substantial financial demands of the artificial intelligence boom. The sell-off led to significant drops in major Asian markets, with South Korea's Kospi index falling as much as 11% and triggering a circuit breaker. Heavyweights Samsung Electronics and SK Hynix saw their shares plummet by up to 14% and 13%, respectively.
In Japan, the Nikkei 225 index declined by 5%, with memory-chip maker Kioxia, a strong performer in the first half of the year, slumping 18%. Taiwan Semiconductor Manufacturing Co. also fell over 3%, contributing to a 4.7% drop in the Taiex index.
Even China's CXMT Corp., a recent high-profile listing, experienced a pullback. Its shares dropped as much as 7.7% at the open before recovering to trade 1.6% lower by midday. Despite this, the stock retained most of its substantial gains from its debut, underscoring investor enthusiasm for China's drive to build a domestic semiconductor industry. Profits in China's chipmaking sector surged over 2,500% in the first half of the year, supporting expectations for a multiyear expansion.
The broader market weakness followed a report indicating that a Chinese state-backed company has begun producing chipmaking machines domestically, a step toward reducing reliance on foreign suppliers, although the technology lags behind global leaders. The sell-off also reflects growing investor unease about the vast sums of money being invested in AI and the interconnectedness of chipmakers, cloud providers, and AI developers, with fears that weakness in one area could spread rapidly across the sector. This sentiment also impacted Nvidia, whose shares fell about 5%, allowing Apple to surpass it as the world's most valuable publicly traded company.