Asian technology stocks suffered a severe selloff on Friday, with Samsung Electronics, SK Hynix, and SoftBank Group leading the decline as concerns over the sustainability of artificial intelligence spending spread from Wall Street. The rout, triggered by a sharp drop in US tech shares, exposed growing anxiety about the heavy borrowing that has financed the industry's rapid expansion.
In Seoul, Samsung fell as much as 9.98% in early trading, while SK Hynix dropped 11.71%. The KOSPI index plunged more than 8%, prompting a 20-minute trading halt—the first such circuit breaker in years. SoftBank shares in Tokyo slid roughly 11% at one point, while the cost of insuring its debt against default reached a four-year high.
US Tech Rout Sets the Stage
The selloff in Asia followed a brutal session on Wall Street, where the Nasdaq Composite lost 5.52% and the Philadelphia Semiconductor Index tumbled 12.25%. Nvidia fell 9.26%, and Micron Technology slid 17.46%, reflecting a broad retreat from companies tied to data-center expansion. The losses were exacerbated by Democratic gains in Tuesday's US midterm elections, which raised fears of stricter oversight of data-center construction.
Investors worry that new regulations could delay projects, potentially affecting orders for chips, power equipment, and other components across the region. However, no sweeping restrictions have been implemented yet. The core concern is whether AI developers can generate enough revenue to justify the enormous capital expenditures, much of which has been financed through debt.
Korean Chipmakers Recover Some Ground
Samsung briefly fell to 181,400 won, down 9.98%, while SK Hynix declined to around 1.116 million won. The KOSPI fell below 5,000, triggering the automatic circuit breaker at 9:03 am Seoul time. By mid-morning, Samsung had trimmed its decline to 3.23% and SK Hynix to 5.30%, with the KOSPI down about 3.9% as domestic buyers stepped in despite foreign investors selling roughly 1.1 trillion won of shares.
Both companies are key suppliers of memory chips essential for AI servers. SK Hynix specializes in high-bandwidth memory used alongside advanced processors, while Samsung also supplies server DRAM and other components. Their current orders have not shown signs of collapse, but investor confidence in sustained demand is wavering.
Kiwoom Securities analyst Han Ji-young told the Seoul Economic Daily that the sell-off appeared excessive, noting that neither the scope of possible US regulation nor any decline in AI demand had been established.
SoftBank Faces Credit Market Warning
SoftBank shares were down 9.87% by late morning in Tokyo, but the more telling signal came from credit markets. Its five-year credit default swap spread rose 22 basis points to 466 basis points, the highest since October 2022. The spread reflects the cost of insuring against default, not an actual default, but it indicates growing unease about SoftBank's leverage.
SoftBank has invested about $64.6 billion in OpenAI and owns roughly 90% of chip designer Arm. It has borrowed heavily to fund AI investments, while OpenAI's delayed public offering has pushed a potential route to realizing returns into 2027. Futurum Group analyst Rolf Bulk warned that possible state-level restrictions could delay projects representing roughly one-third of planned US data-center capacity.
The selloff highlights the fragility of investor confidence in the AI boom, which has driven valuations to historic highs. As funding costs rise and regulatory risks loom, the sector faces a critical test of whether its growth narrative can withstand scrutiny.
This article is for informational purposes only and does not constitute financial advice.
