The sell-off in AI stocks has intensified, pushing South Korea's stock market to its lowest point in three months. Investors continued to divest from chip stocks on Tuesday, amidst growing concerns regarding the substantial borrowing by AI companies to finance their datacentre expansion plans.
South Korean semiconductor firms SK Hynix and Samsung Electronics both experienced declines of more than 10%. This downturn dragged the country's Kospi share index to its lowest level since mid-April.
Analysts have attributed the sell-off to renewed anxieties over AI investment spending and increased competition from cheaper Chinese companies. This follows a report indicating that China has commenced mass production of homegrown deep ultraviolet (DUV) chip-making tools.
Jing Jie Yu, an equity analyst at Morningstar, stated that the market was likely "spooked by the progress of China’s chip-making equipment capabilities," fearing a threat to global chip leaders. Yu described the sell-off as "largely a kneejerk reaction and overdone."
Further underscoring China's push for its own AI supply chain, shares in Chinese memory chip maker CXMT surged by 466% on Monday during its flotation on the Shanghai stock exchange. Investors may also be growing uneasy about "circular funding" within the AI industry, where AI firms finance one another.
On Monday, the Wall Street Journal reported that Nvidia was in discussions with OpenAI to potentially provide $250 billion (£188 billion) for a large datacentre project in Ohio. News of these talks led to a 5% drop in Nvidia's shares, closing below the $200-per-share mark, and an increase in the cost of insuring the company's debt against default.