SK Hynix shares plunged more than 10% on Thursday, caught in a wave of selling that swept across Asian tech stocks. This slide came on the heels of Wall Street's rough day, where losses were fueled by anxiety over potential interest rate hikes from the Federal Reserve. Investors are also worried about the challenges of financing for artificial intelligence investments.
In South Korea, the tech sell-off was stark. Samsung Electronics shares dropped 7.1%, with other chip-focused stocks feeling the heat too. LG Innotek fell 8.1%, Seoul Semiconductor lost 7.7%, and Samsung SDI slipped 6.8%. The turbulence didn't stop at Korea's borders; Japan felt it too. The SoftBank Group saw a 7.9% decrease, while semiconductor testing firm Advantest and chip equipment supplier Tokyo Electron each tumbled, with declines of 6.9% and 5.4%, respectively. Renesas Electronics also shed 5.4%.
There's a growing sense of unease among investors about how rising borrowing costs could impact the hefty spending required for AI infrastructure. This pressure is hitting tech companies hard, companies that have thrived amid the AI boom. Earlier this week, Broadcom and Intel executives underscored financing as a major hurdle in AI's expansion. Broadcom's Hock Tan highlighted that this issue could be more daunting than anticipated, potentially surpassing challenges like chip shortages or electricity constraints.
The sell-off intensified after a tough session on Wall Street Wednesday. Technology stocks led the decline, following the release of hotter-than-expected U. S. inflation data. This data fed into fears that the Federal Reserve would hike rates further. The tech-heavy Nasdaq Composite dropped 1.88% to 26,692.87, the S&P 500 fell 1.11% to 7,718.94, and the Dow Jones Industrial Average edged down 0.09%.
Tech analyst Dan Ives of Yorkville Ives observed that the recent sell-off in AI-related stocks mirrors rising concerns over the cost of financing large infrastructure projects. U. S. Treasury yields climbing above 5% are a factor. Yet, Ives argued that demand for AI computing power remains robust. While higher yields raise financing costs, they don't necessarily signal waning demand. He suggested the current pullback might actually offer a buying opportunity, as the AI boom is still in its infancy.
Ives warned that a real worry would be if demand shifts, not just interest rates. He pointed out that signs of trouble would include cuts in hyperscaler capital spending plans, canceled contracts, or falling GPU rental prices.
