Global Stocks Slide as AI Fears Hit Semiconductor Stocks, Sending Kospi Sharply Lower as Investors Reassess Market Risks
World equities slipped on Tuesday as a fresh wave of doubt about the artificial intelligence boom hit the chip sector, with South Korea’s Kospi suffering its worst day in nearly two months. The MSCI world index fell 0.14 per cent, while its broadest gauge of Asia-Pacific shares outside Japan dropped more than 2 per cent to its lowest level since late July, according to Reuters. Investors moved into government bonds as the selling spread from Asia to Europe and, in early indications, to US stocks.
The Kospi fell 5.5 per cent to 6,035.35 in the Associated Press’s account, after dropping more than 7 per cent at one point and briefly breaking below the 6,000 mark. The index hit an all-time high in June after crossing 9,000, helped by the global AI boom, so Tuesday’s slide takes it well below that peak. Samsung Electronics lost 7.4 per cent and memory specialist SK Hynix plunged about 10 per cent. In Japan, the Nikkei 225 shed 1.8 per cent to 67,777.52, with chip equipment maker Tokyo Electron down 7.2 per cent and SoftBank Group, a major backer of AI companies, falling around 8.5 per cent. Memory chip company Kioxia dropped as much as 13.3 per cent. TSMC, the world’s largest contract chipmaker, was off a smaller 1.8 per cent.
Two developments appear to have set off the move. The first was a report of technical progress at ChangXin Memory Technologies, a Chinese memory chipmaker, which reignited worries that China’s AI-related industry could erode the pricing power and profit margins of established producers such as Samsung and SK Hynix. The second was a comment from Hock Tan, chief executive of Broadcom, at an event in Singapore on Monday. Reuters reported that he likened some of the money flowing into the AI sector to “casino gambling.” Forbes, in its account of the remarks, described him as comparing some AI investors to gamblers who do not understand the technology and hold unrealistic expectations. The comment carried weight because Broadcom is one of the biggest suppliers of chips and networking equipment to AI data centres, so the warning came from inside the industry rather than from a sceptical outsider.
Memory chipmakers were hit hardest because their fortunes are closely tied to demand for the high-bandwidth memory used in AI servers. When investors start doubting whether that demand will keep growing at its recent pace, or whether new competitors will pull prices down, shares that have run furthest tend to fall fastest. Charu Chanana, chief investment strategist at Saxo, said investors were asking whether AI demand would stay strong and whether the exceptional profits and margins of recent quarters could last. That is a shift in the question being asked. For much of the past two years, the debate was about how quickly AI spending could grow. Now more investors are asking what happens if it grows more slowly, or if the returns are lower than hoped.
The selling did not stop at Asia’s borders. In US premarket trading, Micron fell about 2 per cent after losing roughly 3.9 per cent on Monday, according to market reports, while Western Digital dropped nearly 4 per cent and AMD and Broadcom each slipped around 1 per cent. European chip names also weakened. STMicroelectronics slid 2.6 per cent, ASM International lost 2.4 per cent, and ASML, the Dutch chip equipment maker, fell about 1 per cent in early trade. Because the figures for US stocks were premarket moves, readers should check the final closing numbers once Wall Street’s session is complete.
Not everything fell. European stocks bucked the trend, with the STOXX 600 rising 0.5 per cent to a one-week high, helped by the region’s limited exposure to technology and by a drop in oil prices. Britain’s FTSE 100 gained 0.8 per cent, Germany’s DAX climbed 0.6 per cent and France’s CAC 40 added 0.3 per cent in early trading. Hong Kong’s Hang Seng edged up 0.3 per cent and the Shanghai Composite was up 0.1 per cent, so the damage was concentrated in markets with heavy chip and AI weighting. That uneven pattern is useful context. A broad flight from equities would have hit all regions. What happened instead looks like a targeted reassessment of one crowded theme.
The timing adds weight to a warning the International Monetary Fund issued the same day. In its October Global Financial Stability Report, the Fund named an AI-related market correction among three plausible near-term triggers for financial stress, alongside a sharp rise in sovereign bond yields and a major cyberattack. It noted that hyperscalers now account for 10 per cent of global investment-grade bond issuance, up from under 1 per cent in 2024, and said markets should not be complacent. Tuesday’s sell-off was not caused by the IMF’s report, and the two events had different immediate triggers. But they pointed in the same direction, and investors have noticed.
It is worth keeping the scale in perspective. A single day’s fall, even a sharp one in the Kospi, does not make a correction. The MSCI world index moved less than 0.2 per cent, and bond markets, which usually react strongly to real alarm, saw only a measured rise in demand. Earlier this year the same chip shares rallied hard, so some investors are likely locking in profits after big gains. Analysts quoted in market coverage said whether this turns into something deeper will depend on upcoming inflation data, company earnings and evidence of how quickly Chinese rivals can narrow the gap with established chipmakers.
Several things will be worth watching in the coming days. US inflation data due on Thursday will shape expectations for interest rates, which matter because higher rates reduce the present value of companies whose profits are expected far in the future. The start of the earnings season will show whether AI spending plans are being maintained or trimmed. And any more details on Chinese memory production could keep pressure on Korean and Japanese suppliers.
For investors in Nigeria and other emerging markets, the link is mostly indirect. Global risk appetite influences how much foreign portfolio money flows into frontier markets, including Nigeria’s equities and bond market, and market reports in recent days have pointed to foreign investors as important suppliers of dollars to the naira market. A prolonged chip sell-off that spills into wider risk aversion could make those flows less predictable, though nothing in Tuesday’s data suggests that is happening yet. As always, this article is a report on market events and not financial advice.
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