Shares of leading AI memory companies plummeted following a leak from Meta

Shares of Samsung Electronics and SK Hynix plummeted during trading in Seoul: early in the session, Samsung’s decline exceeded 8%, while SK Hynix shares fell by nearly 10%. As a result, the entire South Korean market came under pressure: the benchmark Kospi index lost nearly 7% in the morning, and the Korea Exchange had to suspend automatic selling, according to the local news agency Yonhap. Later, the index and the stocks of both major memory chip manufacturers recovered some of their losses.

One of the triggers for the sell-off was a Bloomberg report stating that Meta Platforms intends to build its own cloud business that will sell access to computing power. This news has heightened concerns about whether the market will face a surplus of AI computing power following several years of aggressive investment in infrastructure.

The pressure was further intensified by reports that Apple plans to purchase scarce memory chips from Chinese semiconductor manufacturers. Investors saw this as a risk to the positions of Samsung Electronics and SK Hynix, the publication notes.

"The fact that Meta is considering selling its computing capacity suggests that the company may be having difficulty finding a suitable use for it or may have built up an excess of capacity, said Wei-Sern Ling, managing director of Union Bancaire Privee. “This will have negative consequences for ‘pick-and-shovel’ companies in markets such as Korea.” The term “pick-and-shovel” companies typically refers to suppliers of equipment or services to a rapidly growing industry.

“Today’s weakness in the Korean market was partly triggered by the negative trend in the U.S. market yesterday,” said Gerald Gan, Chief Investment Officer at Reed Capital. “The Korean market is likely still in the process of seeing speculative, margin-based positions held by retail investors in AI-related stocks—which had previously been the main drivers of the index’s growth—being unwound.”

Shares of U.S. memory chip and data storage manufacturers Micron Technology and SanDisk plummeted by more than 10% on July 1 in New York. Analysts attributed this sell-off to profit-taking following a rally in the first half of the year.

Weakness in chipmaker stocks may persist for a while longer, but is unlikely to drag on, according to Jay Woods, an investment strategist at Freedom Capital. He estimates that the technology sector, which has risen sharply, will take a breather in the third quarter but could return to its previous highs by the end of the year.

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