"Almost like a casino": AI chipmakers' stocks plummeted on Asian markets

Shares of chipmakers plummeted during Asian trading on October 13. The sell-off hit South Korea the hardest, where the world’s two largest suppliers of AI memory chips—Samsung Electronics and SK Hynix—dragged the local Kospi index deep into the red, according to The Wall Street Journal.

Their shares fell as much as 9% and 10.2%, respectively, during the session, while the index dropped 7.4%. The decline also affected other markets in the region: Taiwan’s TSMC fell as much as 2% at one point, the Taiex index dropped 2.5%, and Japan’s Nikkei 225 fell 2.9%.

The Wall Street Journal notes that selling in the U.S. technology sector and escalating geopolitical tensions put pressure on Asian markets. The newspaper cites MUFG analyst Michael Van, who says that the relative stability of the S&P 500 during trading on October 12 masked weakness in chipmaker stocks, which spilled over into Asian markets today.

In the U.S., the Philadelphia Semiconductor Index fell 2.7% at the close of trading on October 12, while Micron’s stock price dropped nearly 4%. Concerns about the sector were heightened by a warning from Broadcom CEO Hock Tan, who compared investments in AI to gambling, according to the Financial Times.

“Many investors have no idea what they’re investing in,” Tan said at an event in Singapore on October 12. “They have extremely high expectations, and then it turns out that it’s almost like being in a casino,” he added (as quoted by Bloomberg).

The Financial Times sees signs of a broader reassessment of AI’s prospects in the decline of other AI-related companies. In Tokyo, shares of SoftBank Group, which holds a large stake in ChatGPT developer OpenAI, fell by more than 8%.

Doubts about the sustainability of AI spending and the profitability of chipmakers beyond 2026 have persisted even after Samsung’s record results, the FT notes. Last week, the company preliminarily estimated that its third-quarter operating profit would increase nearly ninefold amid an ongoing chip shortage.

“Investors in chipmakers are well aware of the painful cycles of booms and busts in this industry,” explained Dec Mallarkey, head of investment strategy and asset allocation at SLC Management (as quoted by the FT). Therefore, he said, they remain skeptical that these exceptionally high profits can be sustained over the long term.

Conflicts in Europe and the Middle East are making investors more cautious, the WSJ reports. On October 12, Vladimir Zelenskyy reported that Russia had struck Ukraine’s energy infrastructure, despite the “energy truce” announced by Donald Trump. In Saudi Arabia, Iran-backed Houthis attacked the capital’s international airport, killing at least 13 people and wounding hundreds.

Despite rising global tensions, Brent and WTI futures fell 1% on October 13. The Wall Street Journal believes this is likely a technical correction.

This article was AI-translated and verified by a human editor