As of the close of US markets on the morning of the 28th Beijing time, SK hynix ADR fell 7.47% to $143.02, dropping below its IPO price from July 10. On the same day, the South Korean stock market experienced three circuit breakers, with SK hynix shares listed in Korea plunging over 14%.
Potential for Direct Competition with Korean Memory Firms
Reuters reported that the broad sell-off in the semiconductor sector was triggered by a series of industry news, reigniting market doubts about the sustainability of the chip rally driven by the artificial intelligence industry. As a key supplier of NVIDIA's high-bandwidth memory (HBM) chips, SK hynix is one of the biggest beneficiaries of the current AI capital expansion boom, making its share price highly sensitive to shifts in market sentiment toward the semiconductor sector.
Analysts indicated that the collective decline in chip stocks resulted from a combination of market concerns: worries about financing pressure for AI data center projects, breakthroughs in China's semiconductor technology, and increasingly fierce competition from domestic chip manufacturers. A recent report from the Wall Street Journal noted that NVIDIA was planning to provide approximately $250 billion in financing guarantees for a large data center being built by OpenAI. Following the news, NVIDIA shares plunged 4.99%, with investors questioning the scale of NVIDIA's financial support for downstream clients.
On the 24th, the SK Group decided to establish a long-term supply cooperation for advanced memory semiconductors worth $750 billion over the next five years with global tech giants, including NVIDIA. Yonhap News Agency, citing Mirae Asset Securities Managing Director Seo Sang-young on the 27th, stated: "The market is once again hotly debating the NVIDIA-SK Group AI infrastructure and memory chip cooperation framework, questioning whether NVIDIA is artificially creating downstream chip demand through financial support and loan guarantees, posing a risk of circular transactions. There are concerns that if the profit realization cycle for AI businesses lengthens, the entire memory supply chain could face risks of overinvestment and overcapacity."
Reuters reported that the application scale of low-cost Chinese open-source AI models, such as Kimi K3, continues to expand. This has led to market concerns that future demand for AI computing power may be lower than previously optimistic expectations, putting pressure on demand for high-end AI chips and HBM. Meanwhile, the strong debut of ChangXin Memory Technologies (CXMT) on its first day of trading in the A-share market intensified worries about heightened competition in the global memory chip industry. Other reports indicated that Apple is lobbying the Trump administration for permission to use China-made chips in some of its products.
Kim Seok-hwan, an analyst at Mirae Asset Securities in Seoul, told Reuters: "The market's concern is not about CXMT's current profitability, but that its post-IPO capacity expansion and technological iteration could accelerate, directly competing with Korean memory companies in the future." Yonhap noted that the core significance of CXMT's listing is not just obtaining a massive cash injection, but also unlocking financing channels. Post-listing, the company's financial reserves for building production lines and developing next-generation DRAM will be further strengthened.
The report also quoted KB Securities Research Head Kim Dong-won: "CXMT's expansion will take several years, but it is unlikely to cause a global DRAM oversupply. Its target customer base does not directly compete with Samsung and SK hynix."
Awaiting US Cloud Companies' Earnings Reports
The US memory chip sector has also been on a continuous decline recently. As of the close on the 28th Beijing time, the Nasdaq index had fallen for four consecutive trading days. The Philadelphia Semiconductor Index closed down 2.23% on the day, accumulating a decline of approximately 19.43% from its peak on June 22. However, since the start of 2026, the Philadelphia Semiconductor Index has still gained significantly, with a year-to-date increase of 63.13%.
CNBC reported that the heightened market uncertainty this week is primarily due to upcoming earnings reports from Amazon, Meta, and Microsoft, with Apple also set to release its results. The chip sector's performance is heavily dependent on the continuous capital expenditure of hyperscale cloud companies. Even if top tech companies face earnings pressure, chip demand remains tied to cloud service providers' investment in computing power.
Reuters stated that investors are beginning to question whether the multi-year bull market in tech stocks, driven by AI optimism, is running out of steam. Stephanie Lin, Chief Investment Strategist at Hightower, told CNBC: "This week, all US hyperscale cloud companies will announce further increases in capital expenditure, which may put short-term pressure on related chip stocks. However, as long as cloud companies continue to invest in computing infrastructure, it will continue to drive the overall economy."
KOSPI-Nasdaq Correlation Hits Multi-Year High
CNBC reported that the rising correlation between the US and South Korean markets weakens the effectiveness of asset diversification, amplifying market risk if AI capital expenditure cools down. Data from Rayliant Global Advisors shows that the 60-day correlation coefficient between the Korea Composite Stock Price Index (KOSPI) and the Nasdaq 100 has recently risen to 0.50, the highest since 2021. The report noted that the strengthening linkage stems from the increasing weight of Samsung Electronics and SK hynix in the KOSPI. These two companies together account for over half of the index's weight. Both are at the core of the AI hardware supply chain, supplying memory chips for data centers of US tech giants.
Rolf Balk, an analyst at Futurum Group, stated: "The rising correlation is essentially because the KOSPI has evolved into a semiconductor-themed index." The profit growth of Samsung and SK hynix is highly dependent on the capital expenditure of the same cloud service providers that drive the earnings of US chip and tech companies. Balk noted that data center demand accounted for only about 40% of global DRAM demand last year, but this ratio has exceeded 50% this year and is expected to continue rising.
Analysts warned that US and South Korean tech stocks show a pattern of rising and falling together, not a one-way leadership from one market. Philip Wall, Research Director at Rayliant Global Advisors, said: "The performance of US and South Korean tech stocks is increasingly driven by the same underlying factor—the overall market sentiment toward the AI hardware supply chain."
This high correlation carries hidden risks. Industry veterans pointed out that the rising correlation diminishes the diversification hedging effect that investors seek by simultaneously holding US and South Korean stocks. Balk stated: "The South Korean stock market can no longer hedge against the risk of the US tech sector. With half the index's weight tied to a single cyclical sector, the South Korean market will suffer a far greater impact than most global markets if cloud service providers cut capital expenditure."
Balk added that amplified by the effect of leveraged ETF funds, the volatility of South Korean memory chip stocks is significantly higher than that of most US chip companies. Wall echoed this view: The AI sector has become the core logic driving the performance of both US and South Korean tech stocks. The primary purpose of diversification for investors holding positions in both markets—geographic risk hedging—is becoming ineffective.
This article is for reference only and does not constitute investment advice. Investing carries risks, and caution should be exercised when entering the market.
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