AI trading cools down and storage chip competition intensifies, Korean stocks plunge over 5%, marking a second consecutive day of sharp decline; SK Hynix drops nearly 8%

Asia-Pacific stock markets tumbled sharply on Tuesday, as fading AI trading enthusiasm and intensifying competition in the memory chip sector delivered a double blow. Technology shares in Korea and Japan were hit the hardest, with the MSCI Asia-Pacific Index hitting a more than two-month low.

China-based memory chip manufacturer ChangXin Memory Technologies made advancements in new memory architectures; meanwhile, persistently high U.S. Treasury yields have heightened market concerns over the outlook for AI capital expenditures.

Due to weak market sentiment, the KOSPI Composite Index experienced a decline of up to 5.1% at one point on Tuesday, triggering the exchange’s Sidecar circuit breaker and pausing programmatic sell orders for five minutes; shares of Samsung Electronics and SK Hynix both plunged over 6%, extending their losing streak to five days.

In Japan, SoftBank Group dropped more than 8%, while AI supply chain stocks such as Tokyo Electron and Advantest fell by more than 5%. The MSCI Asia-Pacific Index declined 0.9% to 270.78 points, approaching its lowest level since mid-August.

U.S. stock index futures fell during Asian trading hours. The tech-heavy Nasdaq 100 Index futures slid 0.5%, following a decline Monday; the U.S. Semiconductor Index fell 2.7%.

Changes in the competitive landscape are further depressing valuation expectations for Korean chip stocks.

The main drag came from the memory chip segment. ChangXin Memory Technologies’ president Zhao Kanyu announced during an industry event over the weekend that the company had made key progress in next-generation 4F² memory cell architecture, aiming to launch server memory products based on this architecture by the end of 2026.

This design uses proprietary vertical surround gate transistors to suppress leakage, allowing more memory cells to be packed onto a single chip, directly targeting the high-margin DRAM used in AI servers.

Hit by this news and the overnight selloff in U.S. chip stocks, Samsung Electronics fell 6%, while SK Hynix dropped nearly 8%, both headed for a fifth consecutive decline.

The KOSPI Composite Index closed at 6,061.82 points, down 5.1%; the Korean small-cap index slid 2.49%. The Korea Exchange triggered the Sidecar mechanism at 9:47am local time, after the KOSPI 200 futures index had dropped more than 5% for over a minute, pausing programmatic sell orders for five minutes.

Ha SeokKeun, Chief Investment Officer at Eugene Asset Management, commented:

The valuations and share prices of Korean chipmakers appear to be dragged down by uncertainty over whether the upcycle can last until 2028 and beyond.

In Japan, the Nikkei 225 fell more than 2%, while the TOPIX was relatively resilient, dipping only 0.2%. Bank of Japan Governor Kazuo Ueda was scheduled to attend parliament at 1:00pm local time, and the market remains focused on monetary policy direction.

SoftBank Group gapped lower at the open, then continued to slide, tumbling nearly 9%.

AI supply chain stocks such as Tokyo Electron and Advantest fell more than 5%.

The market is now turning its attention to upcoming macro data and earnings season. Hideyuki Ishiguro, Chief Strategist at Nomura Asset Management, remarked:

Some investors may worry that higher bond yields will affect AI-related financing and lead to slower capital expenditures.

This Thursday, TSMC’s quarterly results will be released and are considered one of the most important indicators of AI demand prospects. Meanwhile, U.S. Consumer Price Index (CPI) data will be published this week, following U.S. Treasury yields’ advance to multi-decade highs.

Jason Pride, Head of Investment Strategy and Research at Glenmede, noted:

This week’s CPI report is likely to be the most important data point before the Fed’s October meeting. As long as inflation doesn’t clearly overshoot, the Fed is likely to remain patient regarding the next rate hike.

Earnings season for major U.S. banks also officially starts on Tuesday, with Goldman Sachs, JPMorgan Chase, Citigroup, and Wells Fargo all scheduled to release results.

According to Bloomberg Industry Research, analysts expect S&P 500 constituents’ Q3 earnings to grow about 25% year-over-year. Anthony Saglimbene, Chief Market Strategist at Ameriprise, commented that bank stocks (reflecting consumer and corporate health), large-cap tech stocks (progress in AI monetization), and energy stocks (sustainability of oil price-driven profit gains) will be the three main storylines in this round of earnings season.

Performance of Other Assets

The U.S. Dollar Index edged down 0.1%, paring part of the previous day’s gains.

The 10-year U.S. Treasury yield fell by 3.7 basis points to 5.209%.

In commodities, WTI crude oil fell 0.9%, and Brent crude dropped 0.9% to around $105.80 per barrel.

Spot gold extended its overnight losses, declining by 0.36% during Tuesday’s Asia-Pacific session, quoted at $4,157 per ounce.