South Korean stock market at three-month low as AI sell-off intensifies

Analysts attributed the sell-off to renewed worries over AI investment spending. Photograph: Ying Tang/NurPhoto/ShutterstockView image in fullscreenAnalysts attributed the sell-off to renewed worries over AI investment spending. Photograph: Ying Tang/NurPhoto/ShutterstockStock marketsSouth Korean stock market at three-month low as AI sell-off intensifiesSamsung and SK Hynix fall by more than 10% amid renewed fears over AI spending and Chinese competition

The sell-off in AI stocks has intensified, driving South Korea’s stock market down to its lowest level in three months.

Investors continued to ditch chip stocks on Tuesday, amid rising concerns about the huge amount of borrowing among AI companies to fund their datacentre expansion plans.

The South Korean semiconductor companies SK Hynix and Samsung Electronics fell by more than 10%, dragging the country’s Kospi share index down by 11.5% to its lowest point since mid-April.

US chip stocks extended their recent losses when Wall Street opened on Tuesday, with Intel, Advanced Micro Devices, Sandisk, Western Digital Corp and Seagate Technology all down by more than 4%.

The Nasdaq 100 index of leading tech stocks fell by as much as 1.8% at one point, briefly taken into market correction territory with stocks more than 10% below their early June record high. They later rebounded to settle roughly flat on the day.

Apple bucked the trend, rising to briefly become the second ever company to pass the $5tn (£3.76tn) valuation mark as investors losing confidence in AI stocks sought a safe haven.

Analysts attributed the tech sell-off to renewed worries over AI investment spending, and competition from cheaper Chinese companies, after a report by The Information that China had begun mass production of homegrown deep ultraviolet (DUV) chip-making tools.

“We believe the market was likely spooked by the progress of China’s chip-making equipment capabilities, and was worried that this progress would threaten the competitive position of global chip making and chip equipment leaders,” said Jing Jie Yu, an equity analyst at Morningstar, adding that the sell-off was “largely a kneejerk reaction and overdone”.

On Monday, shares in the Chinese memory chip maker CXMT rose by 466% when it floated on the Shanghai stock exchange, underlining China’s drive to create its own AI supply chain.

Investors may also be growing jittery about the “circular funding” at the heart of the AI industry, through which artificial intelligence firms finance one another.

On Monday, the Wall Street Journal reported that Nvidia was in discussions with OpenAI about providing $250bn (£188bn) for a massive datacentre project in Ohio. Backing from Nvidia, which has an investment grade credit rating, could make it less expensive to raise funding for the project.