Analysis
The selling combines a company-specific trigger, reports of progress at a Chinese memory chip maker, with a broader worry that higher interest rates make the huge AI spending plans harder to finance. Strategists quoted by Reuters disagree on how much it means: one sees the start of a wider shakeout, another a reset in positioning and the cost of capital, not weaker AI demand.
What happened in Asia
South Korea's benchmark Kospi fell more than 7% early on Tuesday, October 13, dipping below 6,000 for the first time since late July before paring losses to close down 5.5% at 6,035.35, according to Dow Jones Newswires. The drop briefly triggered a trading suspension by the Korea Exchange, the first such halt since August. [1] Samsung Electronics and SK Hynix, the world's two biggest memory-chip makers, fell 7.4% and 10% at the close, their fifth straight losing session; the two together make up nearly half of the Kospi's market value. [1]
The Associated Press reported that the Kospi hit an all-time high in June after crossing 9,000, lifted by the global AI boom. [2] Elsewhere, Japan's Nikkei 225 was down 2.5% at the time of the AP's report, and Taiwan's Taiex was down 1.9% at that point. [2] Reuters reported that Tokyo-listed memory maker Kioxia fell 13%. [3]
What set it off
Dow Jones said concerns about competition from Chinese chip makers weighed on Korean chip stocks, after a Chinese memory-chip maker unveiled a new chip structure over the weekend with about 30% less cell area and said it plans a product using it by the end of 2026. The sell-off also followed a 2.7% drop in the Philadelphia Semiconductor Index on Monday. [1] Analysts at a Korean brokerage said investors still appear to view semiconductors as a cyclical industry and are skeptical about the sustainability of earnings. [1]
Why Reuters says the AI trade is turning
Reuters' Tom Westbrook wrote that the sell-off in AI supplier shares was "the strongest sign to date" that the mood on the trade has shifted, with worries that rising interest rates could derail a spending boom larger than America's railroad build-out. He pointed to a data-center operator backed by Nvidia shelving a $5 billion in Australia last week and to credit investors becoming pickier about AI-related debt. [3]
On Monday, BlackRock's research arm cut its U.S. stocks outlook to neutral, citing "potential volatility around the AI buildout," and turned positive on short-term Treasuries, Reuters reported. [3] Damien Boey, a portfolio strategist in Sydney, told Reuters the most important development was "not just bond yields going up, but the volatility for bonds," which was working its way into asset prices across the board, and that AI spending might "come off the boil a little bit." [3]
Marc Velan, an investment head in Singapore, took a more measured view. He said the "brutal session" in Korea reflected positioning and the cost of capital more than a deterioration in AI demand, and that markets were moving to a phase focused on monetization and returns on invested capital. "I wouldn't call this the end of the AI trade," he said, though "Korea could be an early warning of a broader shakeout." [3]
What remains uncertain
Figures are from October 13 Asian trading. The AP's index moves were reported intraday, while the Kospi and Samsung/SK Hynix figures are from the Dow Jones close report; Reuters quoted different intraday moves earlier in the session. Strategists' views are opinions, and the link between the Chinese chip maker's announcement and the sell-off is the explanation given by Dow Jones and the AP.