Shares of South Korea's two largest chipmakers, SK Hynix and Samsung Electronics, suffered sharp declines on Tuesday, with both stocks falling more than 10% in Seoul trading. The sell-off was fueled by mounting concerns over the sustainability of artificial intelligence spending and intensifying competition from Chinese semiconductor manufacturers.
SK Hynix plunged as much as 11.1%, while Samsung Electronics lost nearly 10%, dragging the broader KOSPI index down 7.41%. The decline was severe enough to trigger temporary restrictions on program trading, as the two heavyweights accounted for a significant portion of the market's losses.
AI Financing Fears Hit the Market's Hottest Trade
SK Hynix has been a major beneficiary of the AI infrastructure boom, supplying high-bandwidth memory (HBM) used alongside Nvidia's accelerators. Samsung has also ridden expectations of rising memory and foundry demand. However, those gains left both companies vulnerable when investors began questioning whether the scale and financing of data-center investments can be sustained.
Nvidia fell nearly 5% in Monday's U.S. session after reports that it could provide roughly $250 billion in financing guarantees for an OpenAI data-center project. The news, combined with the emergence of low-cost Chinese open-source AI models, raised doubts about the pace of future spending on advanced computing hardware.
Kiwoom Securities analyst Han Ji-young told Reuters that semiconductor shares had fallen sharply despite stronger-than-expected results from Samsung and Alphabet. The market now demands reassurance on future AI spending, pricing, and order visibility, not just solid quarterly numbers.
China's Chip Ambitions Add Valuation Pressure
Adding to the pressure, Chinese memory maker CXMT closed 466% above its IPO price on its Shanghai debut, signaling strong domestic support for a national champion in the memory chip space. Reports that a state-backed Chinese company had begun producing immersion deep-ultraviolet lithography equipment further stoked fears that local manufacturers could gain access to better chipmaking tools.
While CXMT remains behind SK Hynix and Samsung in advanced HBM technology, its listing provides capital to expand conventional DRAM capacity and reduce China's reliance on imported memory. Mirae Asset Securities analysts noted that investors are less concerned about CXMT's current earnings than its potential for accelerated capacity expansion and technological development after the IPO.
The threat does not require CXMT to overtake either Korean producer in HBM immediately. Faster growth in commodity DRAM could pressure prices, weaken Samsung's conventional-memory margins, and persuade investors to apply lower valuation multiples across the sector. This dynamic echoes broader concerns seen in recent chip stock slides on China competition fears.
Market Sentiment Reset, Not Demand Collapse
Despite the rout, there is no clear evidence that HBM orders have collapsed. The sell-off appears more like a sentiment and valuation reset than a sudden drop in demand. SK Hynix's U.S.-listed shares had already closed Monday at $143.02, below their $149 offering price, and the weakness carried into Asian trading.
Elevated expectations mean that even strong demand may no longer be enough to support premium valuations. The market is now pricing in a higher risk premium for AI-related stocks, as seen in the tumble in Nvidia-backed neocloud stocks on rising costs and competition fears.
The KOSPI's sharp decline also reflects broader jitters about the global chip cycle and trade tensions. For investors, the key question is whether the current pullback is a buying opportunity or the start of a deeper correction. The answer may depend on how quickly AI spending and China's chip ambitions evolve in the coming months.
This article is for informational purposes only and does not constitute financial advice.
