CNBC
On Tuesday, technology stocks experienced a decline following a sell-off in U.S. semiconductor shares, which raised concerns related to artificial intelligence financing and increasing competitive pressures.
European chip stocks experienced significant losses during the early morning trades, with semiconductor equipment manufacturer ASML declining by 3.3%. Notable declines were also observed in STMicroelectronics and Germany’s Infineon, both down by 5%. Dutch companies BE Semiconductor and ASM International similarly saw approximately 4% reductions at the market opening.
In South Korea, shares of leading chip manufacturer SK Hynix, known for its high-bandwidth memory chips utilized in AI applications, fell more than 10%, while rival Samsung Electronics saw a decline of 7.4%. These movements represent their lowest levels since August.
In Japan, SoftBank Group, an investment giant with significant investments in the global AI sector, saw its shares fall by 8.5%. This decline triggered a wider retreat across Japanese semiconductor and electronics stocks.
Tokyo Electron, a key supplier of chipmaking equipment, dropped by 7.2%, while Advantest, known for semiconductor testing equipment, decreased by 2.9%. Additional pressure was felt across other Japanese technology stocks: Lasertec declined over 5%, Disco posted a 4.7% drop, and Renesas Electronics fell by 5.9%.
These declines followed a weaker session for technology stocks on Wall Street, where the Nasdaq Composite index fell by 0.44% on Monday. U.S. memory chip manufacturer Micron Technology experienced a 3.9% drop as market participants considered rising competition from China’s ChangXin Memory Technologies (CXMT), which announced advancements in a new chip structure.
Over the weekend, CXMT released news of substantial progress in developing a new chip architecture that aims to enhance memory density by enabling more data to be packed into smaller spaces.
“Investors are nervous and are seeking reasons to realize profits on AI-related stocks that have outperformed this year, particularly among memory stocks,” remarked Vey-Sern Ling, a senior equity advisor at UBP.
“While it’s true that Chinese memory manufacturers could pose a long-term threat to the global demand-supply balance, in the short term, they are still grappling with technological challenges, particularly regarding advanced memory types like HBM,” Ling explained via email to CNBC.
CXMT shares fell by over 2%.
'Vulnerable' AI sentiment?
Phillip Wool, chief market strategist at Rayliant Global Advisors, stated that CXMT's breakthrough was a pivotal moment for Chinese chipmakers, showcasing their capability to navigate technological restrictions and possibly rival established players earlier than anticipated.
However, he cautioned that the market's reaction seemed disproportionate to the immediate competitive threats posed by CXMT, given that it has not yet demonstrated large-scale production and still trails Samsung and SK Hynix in market share.
“More significantly, we aren’t even addressing HBM here, where Korean manufacturers continue to have an undeniable edge, facing minimal threats from CXMT or any other competitors in the near future,” Wool asserted.
He emphasized that the pronounced sell-off reflected a broader anxiety surrounding the AI sector rather than a fundamental shift in the competitive landscape.
“I interpret this more as an indication of how sensitive AI sentiment is currently,” Wool noted, hinting that volatility may persist as investors reevaluate chip demand and the ability of semiconductor manufacturers to maintain their pricing power.
The CEOs of Intel and Broadcom have both indicated that access to capital may become a significant obstacle to the success of the AI sector, even though demand for computing infrastructure remains robust and outpaces supply.
Investors are also bracing for a week filled with corporate earnings reports and U.S. inflation data, which could offer new insights into interest rate trends, often inversely related to growth stocks.
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