Technology stocks took a pounding on Tuesday, with U. S. semiconductor shares dragging down markets in both Asia and Europe. Concerns over financing for artificial intelligence and mounting competition in the tech sector triggered the downturn.
In Europe, semiconductor equipment maker ASML saw its shares drop by 3.3%. STMicroelectronics and German chip manufacturer Infineon weren't spared either, each experiencing a 5% drop. Dutch companies BE Semiconductor and ASM International also faced the heat, opening about 4% lower.
Asia didn't escape the sell-off. South Korea's chip giant SK Hynix plummeted over 10%, while Samsung Electronics fell 7.4%. Both companies hit their lowest stock levels since August. SoftBank Group in Japan, a heavyweight in tech investments, fell 8.5%, dragging down other Japanese semiconductor and electronics shares.
The pressure was on Japanese tech stocks. Tokyo Electron, a major supplier of chipmaking equipment, saw a 7.2% decline. Advantest, which makes semiconductor testing equipment, dropped 2.9%. Lasertec fell over 5%, Disco lost 4.7%, and Renesas Electronics shed 5.9%.
The declines came after a weak session for tech stocks on Wall Street, where the Nasdaq Composite fell 0.44% on Monday. U. S. memory chipmaker Micron Technology slid 3.9% as investors worried about intensifying competition from China's ChangXin Memory Technologies (CXMT).
Over the weekend, CXMT announced major progress in developing a new chip architecture aimed at increasing memory density by packing more data into a smaller space. This has raised concerns about the potential disruption to the global demand-supply balance in the memory chip market.
Vey-Sern Ling, a senior equity advisor at UBP, noted that investors are jittery and seeking reasons to take profits on AI-related stocks that have been strong performers this year, especially memory stocks. He remarked that while Chinese memory makers could pose a long-term threat, they still face technological challenges, particularly in advanced memory like high-bandwidth memory (HBM).
Phillip Wool, chief market strategist at Rayliant Global Advisors, called CXMT's breakthrough a significant milestone for Chinese chipmakers. However, he cautioned that the market reaction seemed disproportionate to the immediate competitive threat, as CXMT has yet to achieve large-scale production and continues to trail behind Samsung and SK Hynix in market share.
Wool emphasized that the sharp sell-off reflected broader anxiety over the AI trade rather than a fundamental shift in the competitive landscape. He warned that volatility could persist as investors reassess chip demand and the sustainability of semiconductor manufacturers' pricing power.
Adding to the uncertainty, the chief executives of Intel and Broadcom have warned that access to capital could become a major obstacle to the AI boom, even as demand for computing infrastructure continues to outstrip supply.
Investors are also keeping an eye on a busy week of corporate earnings and U. S. inflation data, which could offer fresh insights into the outlook for interest rates. These rates often have an inverse correlation with growth stocks, adding another layer of complexity to the market dynamics.
