Global semiconductor stocks extended their decline on Tuesday as investors reacted to reports of China’s growing capabilities in advanced chip manufacturing and increasing concerns that the rapid pace of artificial intelligence investment may be becoming unsustainable, according to a report by Bloomberg.
A broad index of Asian semiconductor shares fell by as much as 7.5%, its steepest one-day decline since early March, following losses among US chipmakers overnight. The sell-off was driven by reports that a Chinese state-backed company has started mass production of immersion deep ultraviolet (DUV) lithography machines, raising fresh concerns about China’s ability to compete with established global semiconductor equipment manufacturers.
The weakness spread across the region, pushing the MSCI Asia Pacific Index towards correction territory. South Korea’s Kospi dropped almost 11%, while memory chip leaders Samsung Electronics and SK Hynix each fell by more than 13%. Japan’s Nikkei 225 and Taiwan’s Taiex both declined by around 4%, reflecting broad-based pressure on technology shares.
Investor sentiment was also weighed down by concerns surrounding the scale of AI infrastructure spending. Recent announcements involving approximately $750bn of AI-related infrastructure commitments linked to Nvidia prompted questions over debt levels and whether returns on investment will justify the industry’s aggressive capital expenditure plans.
Analysts noted that credit markets appeared increasingly cautious, with the cost of insuring Nvidia’s debt rising sharply, suggesting fixed-income investors are becoming more concerned about risks that equity markets may not yet have fully reflected.
While semiconductor manufacturers across Japan and South Korea came under pressure, several Chinese companies supplying components for chipmaking equipment rallied after the DUV manufacturing reports. Investors interpreted the development as further evidence that China is making progress in reducing its dependence on overseas semiconductor technology.
Japanese equipment makers, including Nikon and Tokyo Electron, were among the hardest hit, each losing more than 10% as investors assessed the potential long-term competitive impact of China’s expanding domestic manufacturing capabilities.
The sell-off also comes ahead of a closely watched week of earnings from major technology companies, with investors looking for updated guidance on AI-related capital expenditure from firms including Meta Platforms and Amazon. Their investment plans are expected to provide an important indication of whether demand for advanced chips will remain strong.
AI-linked memory and storage stocks, which have been among the strongest performers this year, were particularly vulnerable. Kioxia Holdings fell 18%, extending recent losses after a sharp rally, while SK Hynix has surrendered a significant portion of the gains made after reaching record highs earlier this summer.
With quarterly results from Samsung Electronics and SK Hynix due this week, investors are expected to focus not only on earnings but also on management commentary regarding AI demand, pricing trends and future capital spending, as markets seek reassurance that the sector’s strong growth outlook remains intact.
