Asia-Pacific stock markets fell sharply on Tuesday, pressured by fading enthusiasm for AI trades and mounting competition in memory chips, with technology stocks in South Korea and Japan bearing the brunt. The MSCI Asia-Pacific index hit a more than two-month low.
Chinese memory chip maker ChangXin Technology made progress on a new memory architecture; meanwhile, U.S. Treasury yields remained elevated, deepening market concerns over the outlook for AI capital expenditure.
Amid weak sentiment, South Korea's KOSPI index fell as much as 5.1% on Tuesday, triggering the exchange's Sidecar circuit breaker mechanism that paused program selling for five minutes; Samsung Electronics and SK hynix both dropped more than 6%, heading for a fifth consecutive day of declines.
In Japan, SoftBank Group fell more than 8%, while AI supply chain stocks such as Tokyo Electron and Advantest each declined over 5%. The MSCI Asia-Pacific index fell 0.9% to 270.78 points, approaching its lowest level since mid-August.
U.S. stock index futures traded lower during Asian morning hours. Nasdaq 100 futures, dominated by technology stocks, fell 0.5% after the index retreated on Monday; the U.S. chipmaker index dropped 2.7%.
Memory Competition Threat Intensifies Pressure on Korean Chipmakers
Changes in the industry competitive landscape further weighed on valuation expectations for Korean chip stocks.
The drag came mainly from the memory chip sector. ChangXin Memory Technologies President Cao Kanyu announced at an industry event over the weekend that the company had achieved key progress on a next-generation 4F² memory cell architecture, with plans to launch server memory products based on this architecture before the end of 2026.
This design uses proprietary vertical surround gate transistors to suppress leakage, allowing more memory cells to be packed onto a single chip, directly targeting the high-margin DRAM used in AI servers.
Dragged down by this news and the overnight decline in U.S. chip stocks, Samsung Electronics fell 6%, while SK hynix dropped nearly 8%, heading for a fifth consecutive day of losses.
The KOSPI index stood at 6,061.82 points, down 5.1%; South Korea's small-cap index fell 2.49%. The Korea Exchange activated the Sidecar mechanism at 9:47 a.m. local time, after KOSPI 200 futures had fallen more than 5% for over a minute, triggering the mechanism and pausing program selling for five minutes.
Ha SeokKeun, Chief Investment Officer at Eugene Asset Management, said:
The valuations and share prices of Korean chipmakers appear to be weighed down by uncertainty over whether the boom cycle can continue through 2028 and beyond.
In Japan, the Nikkei 225 index fell more than 2%, while the Topix index was relatively resilient, slipping just 0.2%. Bank of Japan Governor Kazuo Ueda had been scheduled to appear before parliament at 1:00 p.m. local time, with markets keeping an eye on the direction of monetary policy.
SoftBank Group gapped lower at the open and continued to slide, falling nearly 9%.
AI supply chain stocks including Tokyo Electron and Advantest dropped more than 5%.
Interest Rates and Earnings Season Form the Next Key Variables
Market attention is shifting to upcoming macroeconomic data and the earnings season. Hideyuki Ishiguro, Chief Strategist at Nomura Asset Management, said:
Some investors may be concerned that higher bond yields will affect AI-related financing and lead to a slowdown in capital expenditure.
On Thursday, TSMC's quarterly earnings report will be released, viewed as one of the most important bellwethers for the AI demand outlook. Meanwhile, U.S. Consumer Price Index (CPI) data will be published this week, after U.S. Treasury yields had already risen to multi-decade highs.
Jason Pride, Head of Investment Strategy and Research at Glenmede, said:
This week's CPI report is likely the most important data the Federal Reserve will see before its October meeting. Barring a significant upside surprise in inflation, the Fed will most likely remain patient on the next rate hike.
The earnings season for major U.S. banks also officially kicked off on Tuesday, with Goldman Sachs, JPMorgan Chase, Citigroup and Wells Fargo all set to report results.
According to Bloomberg Intelligence data, analysts expect S&P 500 constituent companies to post roughly 25% year-on-year profit growth in the third quarter. Anthony Saglimbene, Chief Market Strategist at Ameriprise, said bank stocks (reflecting consumer and corporate health), large-cap tech stocks (AI monetization progress) and energy stocks (sustainability of oil price-driven earnings) will be the three main threads for interpreting this earnings season.
Performance of Other Assets
The U.S. dollar index edged down 0.1%, giving back some of the previous day's gains.
The 10-year U.S. Treasury yield fell 3.7 basis points to 5.209%.
In commodities, WTI crude oil fell 0.9%, and Brent crude fell 0.9% to around $105.80 per barrel.
Spot gold extended its overnight decline, falling 0.36% during Tuesday's Asia-Pacific session to $4,157 per ounce.
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