HONG KONG - The Kospi in South Korea plunged 10% as tech shares took a battering on another black day for Asian stock markets, with a report of a breakthrough in China’s chip industry compounding worries about the longevity of the AI boom.
The losses extended a sell-off across the industry globally following an eye-watering rally over the past two years that has sent several indices and companies to record highs.
They also overshadowed a more upbeat outlook over the Middle East conflict as the United States and Iran paused tit-for-tat strikes for a third day and Donald Trump suggested there was a “good chance” of a deal to end hostilities.
Semiconductor firms were at the forefront of a region-wide rout on Tuesday after the website The Information said that the Chinese company Shanghai Yuliangsheng had started mass production of deep ultraviolet (DUV) lithography equipment, a chipmaking technology long dominated by the Dutch firm ASML.
ASML holds 90% of the global market for DUV equipment, while its top-of-the-line extreme ultraviolet (EUV) units can cost more than $250 million each.
Shares of Seoul-listed SK hynix and Samsung lost around 13% on Tuesday, dragging the Kospi index down 10.2%, having earlier been paused for a 20-minute circuit-breaker.
The two firms have fallen almost 50% since hitting all-time highs last month, while the Kospi is down more than 30%.
Tokyo’s Nikkei shed more than four percent as Kioxia lost 18%, while Advantest and Tokyo Electron dived 11%.
Taipei was also off more than four percent as the market heavyweight and chip giant TSMC took a hit.
There were also losses across the rest of Asia. The Stock Exchange of Thailand is closed on Tuesday and Wednesday for public holidays.
Tuesday’s hammering followed a bleak day on Wall Street, where the Philadelphia Semiconductor Index dropped 2.2% as Sandisk lost 11%, while Advanced Micro Devices and Nvidia gave up around 5%.
Shares of ASML shed more than eight percent in Amsterdam.
The AI trade was already fracturing in recent weeks owing to worries about the vast sums that had been invested in AI, which had fuelled questions about when that would actually begin seeing a return, while extended valuations had also raised eyebrows.
“The immediate fundamentals of semiconductors have not collapsed,” wrote Stephen Innes at SPI Asset Management.
“Demand for high-bandwidth memory remains strong, hyperscalers are still spending, and the largest technology companies have not yet abandoned their capital expenditure plans.
“What has changed is the market’s willingness to capitalise those promises at almost any price.
“The AI trade spent the past several years behaving like a flywheel: rising equity values encouraged more spending, more spending validated higher earnings expectations, and those expectations pushed valuations higher again.
“Now that same wheel is beginning to throw investors off at speed.”
Traders are awaiting earnings this week from SK hynix, Samsung and Kioxia as well as US titans Microsoft, Meta, Apple and Amazon.
The bloodbath in tech overshadowed renewed optimism over the US-Iran crisis, with the two sides stepping back after almost two weeks of retaliatory attacks sparked by a breakdown in diplomacy over Tehran’s blockade of the Strait of Hormuz.
Trump expressed hope that renewed diplomacy could bring an end to the war that began in late February.
“I have a lot of patience. … We’ll see what happens,” he said aboard Air Force One. “I think there is a good chance that something could happen.”
Meanwhile, reports said Oman and Iran were trying to reach an agreement to restart shipping through Hormuz, through which a fifth of global oil and LNG usually pass.
Hopes for a deal sent both mains sharply lower, with international benchmark Brent losing more than eight percent Monday and WTI more than seven percent. Both were down mroe than one percent in Asian trade.
Key figures as of 0330 GMT:
- Seoul - Kospi: DOWN 10.2% at 6,066.21
- Tokyo - Nikkei 225: DOWN 4.3% at 62,159.48
- Hong Kong - Hang Seng Index: FLAT at 25,204.90
- Shanghai - Composite: DOWN 0.6% at 3,836.53 (break)
- West Texas Intermediate: DOWN 1.8% at $81.15 per barrel
- Brent North Sea Crude: DOWN 1.7% at $86.89 per barrel
- Euro/dollar: UP at $1.1378 from $1.1371 on Monday
- Pound/dollar: UP at $1.3301 from $1.3293
- Euro/pound: DOWN at 85.54 pence from 85.54 pence
- Dollar/yen: UP at 163.73 yen from 163.72 yen.
