Semiconductor heavyweights bear the brunt of AI spending concerns

Samsung Electronics, SK hynix fall 4.15%, 5.03%

Kosdaq barely holds 700 line amid US midterm uncertainty

The Kospi is displayed on a screen at Hana Bank's dealing room in Jung-gu, Seoul, on Tuesday. The Kospi closed down 210.29 points, or 3.59 percent, at 5,648.79, while the Kosdaq fell 29.97 points, or 4.08 percent, to finish at 704.39. [Yonhap]
The Kospi is displayed on a screen at Hana Bank's dealing room in Jung-gu, Seoul, on Tuesday. The Kospi closed down 210.29 points, or 3.59 percent, at 5,648.79, while the Kosdaq fell 29.97 points, or 4.08 percent, to finish at 704.39. [Yonhap]

Doubts over the scale of US big tech's artificial intelligence spending swept through South Korean markets Tuesday, sending the Kospi tumbling more than 3 percent to the 5,600 range. Weakness in US technology stocks and caution ahead of the US midterm elections compounded the selloff, with heavy selling concentrated in large-cap semiconductor shares as concerns resurfaced over how companies plan to fund massive AI infrastructure buildouts and turn them into profit.

According to Korea Exchange, the Kospi closed down 210.29 points, or 3.59 percent, at 5,648.79. The index opened 2.46 percent lower and extended its losses through the afternoon, at one point sliding as far as 5,615.80 — a drop of 4.15 percent — threatening to breach the 5,600 line. The Kosdaq also fell 4.08 percent to close at 704.39, barely holding above the 700 mark. Samsung Electronics and SK hynix finished down 4.15 percent and 5.03 percent, at 219,500 won ($164) and 1.4 million won, respectively.

The catalyst was a shift in sentiment toward AI investment. Overnight on Wall Street, the Philadelphia Semiconductor Index dropped 3.37 percent, with AMD and Intel tumbling 7.52 percent and 8.83 percent, respectively. Oracle's announcement that it plans to raise $20 billion through a stock and bond offering to build out AI infrastructure, followed by reports of Anthropic's large-scale infrastructure spending plans, stoked fears about how the industry will finance and ultimately profit from its AI ambitions. Uncertainty ahead of the US midterm elections and the prospect of tighter data center regulation added to the chill in investor sentiment.

Foreign investors' selling on the Kospi was concentrated in semiconductor stocks. Foreigners were net sellers of 1.53 trillion won on the main board, while institutions sold a net 514.7 billion won. Retail investors bought a net 1.66 trillion won to absorb some of the pressure, but it was not enough to stem the decline. Foreigners net sold 637.6 billion won of SK hynix and 206.2 billion won of Samsung Electronics, making them the top two targets of foreign selling on the day. Other large-cap stocks also fell sharply, with Samsung Electro-Mechanics down 7.38 percent, LG Energy Solution off 5.06 percent and SK Square declining 5.37 percent.

Analysts broadly attributed the day's losses to deteriorating sentiment toward the semiconductor sector on AI profitability concerns. "The successive corporate bond issuances by big tech companies have stoked fears about AI funding and weakened investor sentiment across the entire AI value chain," said Lee Kyung-min, an analyst at Daishin Securities. Kang Jin-hyuk of Shinhan Securities said the market "gave back the previous day's gains in semiconductor stocks on concerns over AI capital constraints, even as oil prices stabilized."

The Kosdaq also shed more than 4 percent, barely holding the 700 line. Institutions and foreign investors net sold 234.6 billion won and 76.3 billion won on the Kosdaq, respectively, while retail investors net bought 319.9 billion won. Major stocks including Ecopro, down 4.88 percent, Ecopro BM, off 4.89 percent, and Jusung Engineering, which fell 7.68 percent, all posted steep losses.


kacew@heraldcorp.com