KOSPI down 5.5% amid US sell-off and CXMT memory chip progress
Asian tech stocks plummeted Tuesday following a sharp overnight U.S. tech sell-off and rising geopolitical tensions in the Middle East. South Korea’s KOSPI index closed down 5.5%, while Japan’s Nikkei fell 1.8%. The market retreat was driven by concerns over Chinese competition in memory chip production and investor rotation out of artificial intelligence holdings.
Market Contraction in Seoul and Tokyo
South Korea bore the brunt of the regional sell-off. The KOSPI index dropped to 6,035.35, marking a volatile session where the index plummeted more than 7% during morning trading. Samsung Electronics, the world’s largest memory chipmaker, saw its shares fall 6.8% to 233,500 won, despite reporting positive earnings guidance just one week prior. Its domestic rival, SK Hynix, experienced a sharper decline, closing down 9.1%.
In Japan, the Nikkei Stock Average shed 1,253.4 points, closing at 67,777.52. This marked the fourth consecutive day of losses for the index. Semiconductor-related firms led the decline: Kioxia Holdings finished down 13.3%, electronics manufacturer TDK dropped 4.1%, and equipment producer Advantest fell 2.9%. The Nikkei’s performance was compounded by a three-day weekend, which left the index vulnerable to the negative sentiment originating from New York markets.
Competitive Pressure from ChangXin Memory Technologies
The sell-off was exacerbated by news from China regarding advancements in memory chip architecture. According to the South China Morning Post, ChangXin Memory Technologies (CXMT) reported progress on a new cell architecture designed to increase memory density. CXMT President Cao Kanyu stated at an industrial event in Shanghai that the company intends to roll out products utilizing this architecture before the end of the year.
This development has created uncertainty regarding the pricing power of established global leaders like Samsung and SK Hynix. Investors are now reassessing the competition as Chinese firms narrow the technological gap in the memory sector. U.S. counterparts also felt the pressure, with Micron Technology closing down 3.9% and SanDisk falling nearly 6% in response to the reports of CXMT’s progress.
The sell-off reflects a sharp reset in expectations, rather than a sudden deterioration in underlying AI demand. We expect AI demand to remain structurally strong, but recognize that China is a serious chipmaking player. Investors need to distinguish between companies exposed to the U.S. supply chain, China’s, or both. Sustaining the rally will require earnings delivery, even as the debate over AI monetization drives volatility. — Song Zhe, senior investment specialist at BNP Paribas Asset Management.
Middle East Tensions Drive up Energy Costs
Rising tensions in the Middle East added a layer of macroeconomic instability to the tech-focused market decline. As key energy importers, South Korea and Japan reacted to the escalation of conflict near the Strait of Hormuz and reported Houthi strikes in Saudi Arabia. Brent crude prices surged past $106 a barrel, heightening concerns among corporate leaders regarding supply chain stability and escalating operational costs.
The AI Monetization Debate
Despite the current market tantrum, institutional analysis suggests that artificial intelligence remains a primary driver for long-term equity performance in Asia. JPMorgan reported on Sunday that the market is bifurcating between AI and non-AI sectors, a trend expected to persist through 2027. The report noted that while AI exposure in Asia is concentrated in the hardware layer, the vast majority of index weight and earnings dependency remains tied to the U.S.-led global supply chain.
| Company | Market Movement |
|---|---|
| Kioxia Holdings | -13.3% |
| SK Hynix | -9.1% |
| Samsung Electronics | -6.8% |
| SanDisk | -6.0% |
| Micron Technology | -3.9% |
Market participants are now bracing for the upcoming fiscal quarters, where the focus will shift from speculative AI valuations to tangible earnings delivery.