The sell-off of chipmakers on Wall Street has spread to Asia: South Korea has been hit the hardest

Shares of Asian chipmakers plummeted on August 19 following a sell-off in the sector on Wall Street, according to Bloomberg. South Korea was hit the hardest. During trading, the local Kospi stock index fell nearly 7%, but then pared its losses slightly. The intraday lows for the country’s two most valuable companies— Samsung Electronics and SK Hynix —were 8% and 9.7%, respectively. In the U.S., the Philadelphia Semiconductor Index had lost 5% the previous day.

The decline was partly the result of investors selling off their holdings “following an exceptionally strong rally,” said Jeon In-yoon, head of Fibonacci Asset Management Global. Andrew Jackson, a Japanese equity strategist at Ortus Advisors, called the sell-off an “obstacle” to the just-beginning rebound in AI stocks: following the recent crash, they had just begun to attract buyers again who are focused on market momentum. Despite a recent attempt at a recovery, Bloomberg’s Asian chipmaker index remains 19% below its June record high.

South Korean tech stocks remain the focus of investors in Asia. The rally in May pushed the market capitalizations of Samsung and SK Hynix above $1 trillion each. At the same time, a large volume of leveraged positions drove the KOSPI’s volatility to record levels. Although the sell-off in July forced investors to wind down their leveraged positions, daily fluctuations in the KOSPI index still exceed 5%, according to Bloomberg.

Japan’s Nikkei 225 stock index fell for the second day in a row due to a decline in shares of AI-related companies. The index, which has a high proportion of technology companies, dropped as much as 3.4% during trading. Among the biggest losers were memory chip maker Kioxia Holdings and fiber-optic cable manufacturer Furukawa Electric, according to Bloomberg. Renesas Electronics and Fujikura were also among the worst-performing stocks on the Nikkei 225, with their share prices falling by more than 7%, according to The Wall Street Journal.

Shares of SoftBank, which has invested in OpenAI, plummeted nearly 11% following a Nikkei Asia report that the company plans to issue 1 trillion yen ($6.26 billion) in bonds for retail investors. SoftBank appears to be “barely managing” to raise funds, and the company faces serious difficulties if its bet on OpenAI does not pay off, according to Kazuaki Muramatsu, director of investment management at Nagomi Capital, as quoted by Bloomberg.

Pharmaceutical and retail companies showed the strongest performance: investors sought to diversify their investments beyond the AI sector. ““As bond yields rise, investors are likely to favor value stocks over tech stocks with high P/E ratios,” suggested Shoichi Arisawa, an analyst at Iwai Cosmo Securities (as quoted by Bloomberg).

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