South Korean stock markets witnessed a sharp selloff on Tuesday, with the benchmark KOSPI index tumbling nearly 8% as heavyweight semiconductor companies Samsung Electronics and SK Hynix came under intense selling pressure. The decline was fueled by growing concerns over China’s rapid progress in chip technology and increasing uncertainty surrounding the sustainability of AI-driven semiconductor demand.
The broad market correction reflects investors’ shifting sentiment toward artificial intelligence (AI)-related stocks, as worries mount over rising infrastructure costs, financing risks, and tougher competition from Chinese semiconductor manufacturers.
Samsung and SK Hynix Shares Sink
Samsung Electronics fell by as much as 9.5%, while memory chip giant SK Hynix dropped nearly 11.1% during trading. Earlier, SK Hynix’s US-listed shares had already suffered heavy losses, ending the previous session at $143.02, below their IPO price of $149.
By 0120 GMT, South Korea’s benchmark KOSPI index had declined around 8%, reflecting widespread weakness across the technology sector.
Why Are AI Chip Stocks Falling?
The latest selloff comes after several developments raised doubts about whether the semiconductor rally driven by artificial intelligence can continue at its current pace.
SK Hynix, one of Nvidia’s largest suppliers of high-bandwidth memory (HBM) chips, has been among the biggest beneficiaries of the global AI boom. As a result, any negative shift in AI investment sentiment has an outsized impact on the company’s stock.
Market experts say investors are becoming increasingly cautious due to concerns over massive AI infrastructure spending, slowing enthusiasm for AI investments, and intensifying competition from China.
China’s Chip Advances Trigger Fresh Worries
According to analysts, reports suggesting that Chinese companies are developing their own deep ultraviolet (DUV) lithography machines have renewed fears that China’s semiconductor industry could expand much faster than expected.
Han Ji-young, an analyst at Kiwoom Securities, said that although details regarding the technology, participating companies, and commercialization timeline remain limited, the reports have weakened confidence in global semiconductor stocks.
If Chinese manufacturers successfully develop domestic lithography technology, memory-chip producers could significantly increase production capacity, creating stronger competition for global players like Samsung and SK Hynix.
Investors Turn Cautious Ahead of Earnings Season
Market sentiment has also been impacted by the upcoming earnings announcements from several major technology companies.
Interestingly, semiconductor stocks have continued to decline despite stronger-than-expected financial results from Samsung Electronics earlier this month and Alphabet last week.
According to analysts, investors appear to be focusing less on current earnings and more on future growth prospects for AI-related businesses.
Nvidia, OpenAI Funding Report Adds Pressure
Investor confidence was further shaken after a Wall Street Journal report suggested that Nvidia could provide financial backing worth approximately $250 billion for an OpenAI data center project.
The report sparked concerns that Nvidia may increasingly finance its own customers, raising questions about future profitability. Nvidia shares subsequently dropped nearly 5%, adding pressure to semiconductor stocks worldwide.
Low-Cost Chinese AI Models Raise Demand Questions
Another factor weighing on the sector is the rapid rise of affordable Chinese open-source AI models, including Kimi K3.
These models have prompted investors to question whether future AI applications will require fewer advanced chips than previously expected. If AI computing becomes more efficient, demand for premium AI processors and high-bandwidth memory chips could slow, affecting companies heavily dependent on AI infrastructure spending.
Chinese Memory Chip Makers Intensify Competition
Concerns over competition also intensified after Chinese memory-chip manufacturer CXMT made a strong stock market debut.
Adding to investor anxiety were reports that Apple has reportedly been lobbying the Trump administration to permit the use of Chinese-made chips in certain products. The development reinforced concerns that China’s semiconductor capabilities are improving rapidly and could challenge established global players.
Outlook for Semiconductor Stocks
While artificial intelligence remains one of the biggest long-term growth drivers for the semiconductor industry, investors are becoming more selective as questions emerge over infrastructure spending, competitive pressures, and future demand.
Market analysts believe semiconductor stocks may continue to experience heightened volatility in the near term as investors closely monitor corporate earnings, AI investment trends, and technological developments in China. However, the long-term outlook for the AI chip industry will largely depend on sustained demand for advanced computing and the pace of innovation across the global semiconductor sector.