South Korea’s Kospi index plunged by more than 9% on Tuesday as investors aggressively sold semiconductor shares due to concerns about the sustainability of the artificial intelligence investment boom.
Kospi price over the past day (Source: Google Finance)
The Kospi at one point fell 10.5% to 6,051.19, reaching its lowest level since April. The decline became severe enough for trading restrictions to be activated temporarily.
South Korea’s largest semiconductor companies were at the center of the downturn. Samsung Electronics shares tumbled approximately 12%, while SK Hynix dropped around 12.7%. Because the two chipmakers account for a big portion of the Kospi’s total weighting, their losses had an outsized effect on the benchmark index.
Kospi Hit by Growing Concerns Over Chinese Competition
Investors have recently become more cautious about the valuations of companies linked to artificial intelligence. Semiconductor shares surged as technology companies spent heavily on AI data centers, servers and advanced computing infrastructure. However, questions are now emerging about whether this level of investment and demand can actually continue indefinitely.
Competition from Chinese AI companies and semiconductor manufacturers only added to those concerns. Investors fear that expanding Chinese production could place pressure on prices, profit margins and market share in the global chip industry.
Those concerns intensified after Chinese memory chipmaker ChangXin Memory Technologies, commonly known as CXMT, recorded a remarkable stock market debut in Shanghai. CXMT shares jumped approximately 466% during their first trading session after the company raised at least $8.6 billion through its initial public offering on the STAR Market.
CXMT manufactures dynamic random-access memory, or DRAM, chips that are used in smartphones, computers, servers and AI systems. The global DRAM market has been dominated by Samsung Electronics, SK Hynix and Micron Technology. Now, CXMT’s impressive expansion raised expectations that it could become a more serious competitor to these established manufacturers.
The selling was not limited to South Korea. Japan’s Nikkei 225 dropped approximately 4% to 62,343, while Taiwan’s Taiex declined 3.9%. The Shanghai Composite fell 1%, and Hong Kong’s Hang Seng was down slightly.
Asia market (Source: Google Finance)
The sharp fall in the Kospi shows just how quickly sentiment towards AI-related investments can change. Although long-term demand for memory chips and computing infrastructure is still strong, investors are now questioning high valuations, heavy capital spending and the potential impact of rising Chinese competition.
