Asian Chip Stocks Suffer Worst Day as China Competition, AI Finance Fears Deepen

Samsung Electronics, SK Hynix drop 13%-15%; Japan's Kioxia slides 18%, Tokyo Electron falls 11%

ASML extends losses for a second day after report on China's immersion DUV lithography development

Micron, Intel and other U.S. chip stocks also fall for a second straight day in premarket trading

Semiconductor and chip-equipment stocks across Asia tumbled on July 28 as competition with China intensified and concerns over AI-driven financial excesses weighed on sentiment. Anxiety over the possibility that the Federal Reserve could raise interest rates this week, despite lower oil prices, added to the selloff.

South Korea's Kospi index, seen as a gauge of appetite for AI-related technology shares, fell more than 10% on July 28 to its lowest level in three months. The index had more than tripled over the past 12 months, but has now dropped more than 30% from its peak. SK Hynix plunged 14.65%, while Samsung Electronics sank 13.39%.

Japanese stocks were also swept up in the selloff.

Kioxia slumped 18.33% in Tokyo, while chip-equipment makers Tokyo Electron and Advantest fell 10.96% and 10.11%, respectively. Canon, which makes more mature semiconductor equipment, dropped as much as 6.3%. Nikon, which produces immersion DUV systems, fell 9.2%, with both companies posting their biggest declines in more than two months. The Nikkei 225 lost about 4% on the day, touching its lowest level in two years.

In Taiwan, TSMC fell 3% and MediaTek dropped 9.9%, while the Taiex index slid 4.65%.

The Information reported on July 27 that a Chinese equipment maker had begun domestic development and production of immersion deep ultraviolet lithography systems, a market long dominated by ASML Holding NV of the Netherlands. ASML shares fell 5.8% the previous day and were down nearly 4% in U.S. premarket trading. U.S. chip-equipment companies including Lam Research also declined.

U.S. semiconductor and memory stocks were under pressure again in premarket trading on July 28. Intel, Micron, SanDisk and Seagate all fell more than 4%. Nasdaq futures dropped 0.8%, while S&P 500 futures slipped 0.1%.

There was no single risk signal driving markets, according to Chris Weston, head of research at Melbourne-based brokerage Pepperstone. Concern over AI-related financial excesses and China's emergence as a competitor across the supply chain combined to hurt sentiment.

The July 27 listing of China's CXMT, the world's fourth-largest memory-chip maker, also fueled selling in South Korean memory shares after the company raised $8.6 billion and became China's most valuable company.

CXMT shares, which helped trigger the rout in Asian chip stocks, fell 3% on July 28.

The Wall Street Journal reported on July 27 that Nvidia would provide about $250 billion in financial backing for OpenAI's contracts for data-center computing use, along with $350 billion for hardware purchases including GPUs. Nvidia shares fell 5% on the news.

David Chiu, a strategist at Citigroup, said losses on existing long positions in Nasdaq 100 futures and South Korea's Kospi index had become severe.

As tensions between the U.S. and Iran eased, Brent crude futures extended the sharp decline recorded on July 27, falling to $87.19 a barrel. The move followed the U.S. decision over the weekend to abruptly halt airstrikes. President Donald Trump said on July 27 that the U.S. was having "good talks" with Iran and that a deal was possible.

The yield on the 10-year U.S. Treasury fell about 4 basis points to 4.64% on July 27 as the fighting subsided. Short-term Treasury yields were little changed.

Markets are pricing in about a 38% chance that the Federal Reserve will deliver a 25-basis-point rate increase on July 29, up sharply from about 16% two weeks ago.

Expectations for a rate increase later this month or by September supported the dollar. The dollar index rose 0.08% from the previous day to 101.621. The yen traded at 163.78 per dollar, hovering just above its weakest level in 40 years.

Markets expect the Bank of Japan to leave rates unchanged this week, with the yen likely to weaken further.

Kim Jeong-a, guest reporter, Hankyung.com, kja@hankyung.com