South Korean benchmarks slumped over 6% on Tuesday, led by Samsung Electronics (-8%) and SK Hynix (-10%). Investors fled to government bonds amid rising worries over Chinese AI chip competition and profit margins.
Asian equity markets slid to their lowest levels in more than two months on Tuesday, as a sharp sell‑off in semiconductor stocks sparked fresh concerns over the profitability of artificial‑intelligence (AI) investments. The MSCI broadest index of Asia‑Pacific shares outside Japan fell more than 2%, marking its steepest decline since late July.
South Korea bore the brunt of the downturn. The KOSPI plunged over 6%, its biggest one‑day drop since July, while Samsung Electronics shed 8% and SK Hynix tumbled 10% after a volatile session the day before. Taiwan’s TSMC slipped 1.8%, and Japan’s Kioxia and SoftBank Group lost 14% and 8% respectively, underscoring the breadth of the sell‑off across the region’s chipmakers.
Analysts linked the market reaction to recent reports that China’s ChangXin Memory Technologies (CXMT) is narrowing the performance gap with established memory‑chip producers. The news revived fears that Chinese manufacturers could erode the high‑margin outlook that has underpinned the AI‑driven rally in tech stocks. Charu Chanana, chief investment strategist at Saxo, said investors are now reassessing expectations for AI demand and the sustainability of premium valuations in the sector.
In response to the heightened volatility, investors shifted toward safer assets. Demand for government bonds surged, pulling the benchmark 10‑year yield down five basis points to 5.193%, after briefly touching a 24‑year high. The U.S. dollar remained near an 18‑month peak, while the euro traded around $1.11.
Market participants are now eyeing upcoming U.S. inflation data, which could shape the Federal Reserve’s policy trajectory. The CME FedWatch tool indicates an 80.6% probability that the Fed will keep rates unchanged later this month, up from 51% a month earlier. Meanwhile, earnings from major U.S. banks are slated for release later Tuesday, offering further clues on how higher Treasury yields are influencing credit markets.