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Global technology hardware stocks continued to face pressure on Thursday, following six consecutive trading days of declines in U.S. semiconductor stocks that wiped out approximately $1.6 trillion in market value. As investors reassess the sustainability of AI infrastructure investment, chip stock valuations, and future earnings prospects, the selloff further spread to Asian markets.
South Korea bore the brunt of this round of decline. The KOSPI index opened down 5.59% at 5,673.01 points, then widened its losses to over 7%, and as of press time was down nearly 8%. The Korea Exchange activated the "Sidecar" mechanism (also known as the sidecar mechanism or temporary suspension mechanism for programmatic trading), suspending programmatic selling on the KOSPI. The Nikkei 225 index opened down 1.28% at 66,880.37 points, then widened its losses to over 4%.
South Korea's stock market fell for the seventh consecutive trading day, and if the decline continues, it will mark the longest losing streak since September 2024. The index has now dropped to its lowest level since the end of July. Samsung Electronics and SK Hynix were particularly hard hit, with intraday declines of nearly 8% and over 10% respectively. Both companies are major players in the global memory chip industry and among the primary beneficiaries of the AI infrastructure investment boom. Their simultaneous stock price plunges also highlight the Korean stock market's heavy dependence on the semiconductor sector.
AI Boom Faces Triple Test: Interest Rates, Financing, and Valuation
The direct pressure from this round of selling came from the U.S. market. Investors are concerned that the Federal Reserve may further tighten monetary policy, while also beginning to question whether the massive capital investment needed to build AI infrastructure can be sustained. The U.S. September Consumer Price Index (CPI) rose to its highest level in five months, reinforcing market concerns about inflationary pressure and prompting investors to reassess the Fed's future policy path. Interest rates may remain elevated or even rise further, putting greater pressure on high-valuation technology stocks.
AI financing risks are also intensifying. CoreWeave (CRWV) shares fell sharply, and its bond prices also dropped to levels typically associated with issuer financial distress. This development has reignited questions about the AI infrastructure investment model: if companies continue to invest massive amounts of capital in building data centers and computing facilities, can future revenue and cash flow support these expenditures? Samsung Electronics and ASML Holding previously reported strong results but still failed to ease market tensions. This indicates that investors are currently focused not only on companies' current performance, but also on whether valuations are too high, whether financing costs are rising, and whether expected AI demand can continue to materialize.
Cho Hyunik, a portfolio manager at Seoul-based Iroom Investment Advisors, said investor sentiment is weak and market fatigue is accumulating. He expects that sharp fluctuations driven by capital flows may persist until uncertainty surrounding U.S. interest rate prospects and midterm elections becomes clearer.
Memory Chip Fundamentals Remain Solid, but Cyclical Risks Resurface
In addition to the macroeconomic environment and financing pressures, the inherent cyclicality of the memory chip industry has also made investors more cautious. Memory chips are a key beneficiary of AI infrastructure expansion, and current demand and supply conditions are still considered relatively solid. However, this industry has long been characterized by pronounced cyclicality, with repeated historical patterns of shortages driving prices up, followed by increased supply and a shift to oversupply. Even if fundamentals have not yet shown obvious deterioration, investors may no longer be willing to pay the same high valuations for future earnings as before.
A new competitive variable comes from China. ChangXin Memory Technologies (CXMT) plans to launch server memory products using a new chip structure before the end of the year. This news has further increased pressure on Korean memory chip stocks. CXMT's technological progress does not mean the global memory chip competitive landscape has undergone a fundamental reversal, but it has prompted investors to reconsider whether Korean manufacturers' current leading position can be sustained, and whether competitors will gradually change the future supply-demand and pricing environment.
When market positioning is concentrated in a handful of AI beneficiary stocks, and investors begin to question valuations and industry cycles, even without evidence that fundamentals have completely deteriorated, new competitive uncertainty is enough to trigger large-scale selling. Kang DaeKwun, CEO of Life Asset Management, said Korean stock market valuations have already fallen to extreme levels. A pullback from current levels could offer entry opportunities, but only if investors confirm that the technology industry's financing problems have been resolved.
Why Is South Korea Bearing the Heaviest Impact?
This round of decline was driven by multiple overlapping pressures: weakness in U.S. semiconductor stocks dragging down Asian peers, changing interest rate expectations heightening valuation pressure, AI infrastructure financing concerns raising doubts, and the cyclical nature of the memory chip industry plus competitors' technological progress adding long-term uncertainty. Geopolitical risks have further weakened investors' willingness to quickly rebuild positions.
What makes South Korea unique is that Samsung Electronics and SK Hynix occupy a significant position in the stock market. When both memory chip giants simultaneously face large-scale selling, the pressure quickly spreads from individual stocks to the entire index. The KOSPI's intraday decline of over 7% precisely reflects this concentration risk.
The weakening of the Korean won is particularly noteworthy, as South Korea is precisely the market suffering the most severe stock selloff in this round. The simultaneous appearance of technology stock declines and exchange rate pressures further reflects the contraction of risk appetite in the Korean market.
At present, there is insufficient basis to conclude that the semiconductor industry's prosperity cycle has completely collapsed, nor can it be asserted that competitor competition has already overturned the existing industry landscape. However, the market's assessment of AI investment logic is changing: investors are no longer only looking at demand growth and corporate earnings, but are also more rigorously examining financing costs, valuation premiums, competitive dynamics, and industry cycles. When these factors simultaneously become trading risks, chip stocks that originally benefited from the AI boom may face dramatic valuation adjustments.
Thursday's performance in Asian markets shows that South Korea bore the most concentrated impact, and whether this round of selling can stabilize will depend on whether the market's judgment on interest rates, AI investment returns, and semiconductor industry prospects can regain stability. Next, the market will focus on TSMC's earnings report due later on Thursday. TSMC's results and its assessment of industry demand will serve as an important reference for investors observing the semiconductor outlook.
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