The sell-off in US chip stocks has crossed over to Asia, causing a widespread downturn in the region's semiconductor sector on Thursday.
SK hynix shares listed in Seoul plummeted more than 11%, completely erasing the previous session's 8% gain.
Following its US listing last week, SK hynix has experienced significant volatility, with its shares now in a sharp decline. The stock closed down 11.5% in Seoul, wiping out all of Tuesday's gains. This comes after the stock recorded its largest single-day drop on Monday as investors took profits amid concerns over the outlook for artificial intelligence-related spending.
Other South Korean companies in the sector also faced pressure: Samsung Electronics fell over 8%, Seoul Semiconductor dropped 5.13%, LG Innotek declined 2.91%, and Samsung SDI slid more than 4%.
The weakness extended across the broader Asian region. In Japan, AI equipment maker Advantest fell 5.93%, SoftBank Group dropped 6.27%, Tokyo Electron declined over 4%, and Renesas Electronics closed down 7%.
This Asian slump follows a sharp overnight sell-off in US semiconductor stocks, where Micron Technology tumbled 8%, Intel fell over 4%, and Lam Research and Advanced Micro Devices (AMD) both dropped around 3%.
According to Rolf Bulk, Head of Semiconductor & Infrastructure Equity Research at Mirae Asset Securities, "Today's weakness in Asia is primarily a continuation of the overnight move in the US."
He pointed to two bearish signals: a proposed pause on new data center projects in New York and reports that cloud computing firm CoreWeave is hedging against potential future declines in memory chip prices.
New York Governor Kathy Hochul issued an executive order on Tuesday temporarily halting major new data center projects, with the state planning to introduce stricter regulations to manage their energy consumption, water use, and environmental impact.
Bulk suggested the current downturn is more a case of profit-taking after a strong rally rather than a deterioration in industry fundamentals. He noted that the long-term structural demand for AI infrastructure and memory chips remains solid.
With major cloud providers racing to build AI computing infrastructure, high-bandwidth memory (HBM) chips remain in tight supply, allowing leading memory makers like SK hynix and Micron to maintain strong pricing power.
The sell-off occurred even as lithography giant ASML reported strong earnings. The Dutch semiconductor equipment maker raised its full-year revenue guidance for the second time this year, forecasting revenue between €43 billion and €45 billion, exceeding analyst expectations. The company also announced plans to further expand production of its extreme ultraviolet (EUV) lithography machines.
Louis Kondratiev, a trader at XFUNDs, analyzed that this pullback stems from an overcrowded trade in the semiconductor sector following a prolonged bull run in AI-related stocks.
He stated, "The semiconductor sector now accounts for nearly 20% of the S&P 500 index, a level that is difficult to sustain long-term. During the 2000 dot-com bubble, the sector's weighting was just over 8%, with a historical average of only 2% to 5%."
He added that while corporate earnings growth remains robust, the pace of stock price appreciation may be difficult to maintain as investors reassess current elevated valuations.
"Corporate earnings growth is impressive, but it is highly concentrated in the semiconductor industry; as valuations return to more reasonable levels, this growth momentum is likely to gradually slow down."
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