Stock markets are tumbling in Asia, as an AI sell-off pushes investors to dump some of the biggest chip stocks in the industry. The South Korean Kospi dropped more than 10% on Monday, with trading halted at one point, and Japan’s Nikkei fell more than 4%.
Shares in the chip companies SK Hynix and Samsung Electronics both fell by more than 10%. It follows a rough day of trading in the US too – SK's US-listed shares dropped 7% on Monday, and chip designer Nvidia dropped 5%, giving Apple back its top spot as the world’s biggest listed company.
Investors are growing increasingly fearful of the huge amount of borrowing among AI companies – and a report from the FT last night highlighted that prices for credit default swaps ( a tool to bet against corporate debt) tied to the likes of Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom and Nvidia have risen to record highs in recent days.
Jim Reid, of Deutsche Bank, says markets are “caught between a new sell-off in chipmakers and the positive news that the US-Iran pause from over the weekend would continue as both sides negotiate in talks.”
“This meant that the S&P 500 (+0.02%) and Nasdaq (-0.16%) were little changed yesterday after an initial rally, whilst the Philly Semi Stock Exchange Index (-2.23%) fell further. The equity performance also wasn’t helped by new highs in real yields, though nominal 10yr Treasury yields (-2.8bps) came down as Brent crude fell -8.70% yesterday, in its largest decline since April. It is an additional -2.0% lower this morning, trading at $86.59/bbl, after being at $101 on Friday morning. S&P 500 (-0.22%) and Nasdaq (-0.74%) futures are lower this morning.”
The rout in AI stocks also followed a report by the Information that China has begun mass production of homegrown deep ultraviolet, or DUV, chipmaking tools.
Jing Jie Yu, an equity analyst at Morningstar, said:
“We believe the market was likely spooked by the progress of China’s chipmaking equipment capabilities, and was worried that this progress would threaten the competitive position of global chipmaking and chip equipment leaders.
That said, we believe the sell-off today is largely a knee-jerk reaction and overdone.”
The AI sell-off also comes even after a flying market debut for the Chinese chip company CXMT, which joined Shanghai’s stock exchange on Monday and surged by more than 400% in its first day of trading.
The agenda
7am BST: Barclays half year results, Unilever half year results, GSK second quarter earnings, Games Workshop full year results
Today: Tate & Lyle holds a general meeting in London for shareholders to vote on proposed acquisition by Ingredion
