Shares in major Asian semiconductor companies experienced sharp declines on Wednesday following earnings that fell short of investor expectations. South Korea’s SK Hynix, a leading producer of chips essential for artificial intelligence datacentres, reported record profits for the second quarter but the results underwhelmed the market, triggering a significant sell-off. SK Hynix shares dropped as much as 16%, while fellow chipmaker Samsung Electronics fell nearly 10%.
Seoul’s Kospi index, which is heavily weighted toward semiconductor manufacturers, slid by as much as 12.6% during Wednesday’s trading session, extending losses from the previous day’s near 11% decline. The two-day fall marks the index’s worst performance in recent months, with the benchmark now trading at its lowest level since early April. The index has declined more than 40% from a peak reached slightly more than a month ago. Japan’s Nikkei index declined 1.5% in comparison.
Market analysts attributed the downturn to investors reassessing the sustainability of technology spending on artificial intelligence infrastructure. Portfolio managers noted that while SK Hynix’s financial results were strong in absolute terms, they failed to meet the elevated expectations of investors seeking evidence of long-term growth catalysts. Concerns centered on whether major technology companies could maintain their current investment pace in AI development and infrastructure expansion.
The sell-off extended to American markets, where shares in Intel, Advanced Micro Devices, Sandisk, Western Digital Corp, and Seagate Technology all declined on Tuesday. Taiwan’s TSMC, the world’s largest contract chipmaker, fell 3% during Wednesday trading in Taipei. Apple benefited from the market rotation away from semiconductor stocks, briefly surpassing a $5 trillion valuation threshold.
Analysts identified retail investors using borrowed funds as significant participants in both the earlier rally and current decline. South Korea’s finance minister indicated the government was evaluating potential market stabilization measures in response to the volatility.
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