Chip stocks slide across Asia
The Kospi index fell 7.4% to 5,914.35 on 13 October, its lowest level since late July, according to AP. The index had crossed 9,000 and reached an all-time high in June. Reuters reported that selling of Korean chipmaker shares extended into a fifth straight day, with the Kospi down about a quarter from its July highs. Samsung Electronics fell 7.7% and SK Hynix 8.8%, while Tokyo Electron lost 6.6% and SoftBank Group, an OpenAI investor, lost 8%. Japan's Nikkei 225 was down 2.5% at 67,292.39, and Kioxia's fall was put at 13% by Reuters and above 14% in other reports.
The sell-off accelerated in the morning. The Korean exchange triggered a sell-side sidecar at about 10:00 local time, a mechanism that suspends program sell orders for five minutes and applies when the Kospi 200 futures contract is down 5% or more for at least one minute. Reuters called the falls the heaviest since the same kind of stocks collapsed at the end of July.
A Chinese memory chip plan triggers the sell-off
Traders said media reports that CXMT, the Chinese chipmaker that listed in July, plans a new generation of memory chips for data centres set off the selling. At an industry conference in Shanghai, Changxin Memory Technologies (CXMT) said it expects a new DRAM architecture this year that could use silicon wafers far more efficiently. The 4F² architecture is expected to raise memory density on a given area by 30 to 50%. A Bloomberg report said CXMT aims to bring a higher-density server memory to market by the end of 2026, though it still has to show it can run competitive mass production. Samsung is working on a similar project but expects results only in 2028, according to the Igor's Lab technology blog. CXMT shares still fell about 2.8% in Shanghai on 13 October.
- Kospi reaches an all-time high after crossing 9,000, and chip shares begin falling from mid-June
- Chip stocks collapse, and the Kospi later falls about a quarter from its July highs
- Data centre IPO collapses in Australia, and Samsung reports quarterly results
- BlackRock downgrades US stocks to neutral, and Broadcom's Hock Tan criticises AI investor expectations
- Korean exchange triggers a sell-side sidecar, pausing program sell orders for five minutes
- IMF warns that an AI correction could be global
Warnings from BlackRock, Broadcom and the IMF
On 12 October the research arm of BlackRock, the world's biggest asset manager, cut its US stocks outlook to neutral, citing 'potential volatility around the AI buildout', and turned bullish on short-term Treasuries. The same day, Broadcom chief executive Hock Tan told a technology conference in Singapore that many investors have no idea what they are investing in, according to Bloomberg. Tan also warned that capital shortages could replace the chip shortage as the main bottleneck in AI build-out.
In its latest financial stability report, published on 13 October, the IMF said:
The consequences of an AI correction could be global.
The IMF also said there was growing evidence that capability investments and economic gains may not be as big as expected, and that high valuations and rising debt pose a risk to financial stability.
Spending plans and debt
Economist Thorsten Slok of Apollo Global Management calculated that investment by Amazon, Alphabet, Meta, Microsoft and Oracle could rise to 892 billion dollars this year, against the 465 billion dollars analysts expected a year earlier. For 2027 the figure could reach 1.1 trillion dollars, compared with 495 billion dollars a year earlier.
Handelsblatt put the scale in context: Germany's gross government investment in 2025 came to 170.6 billion dollars. Technology firms have taken on hundreds of billions of dollars of debt to finance data centres and key chips, and SpaceX, Google and Amazon have raised tens of billions in new borrowing. Credit investors have become pickier about AI debt, Reuters reported.
Caution spreads to bonds
Reuters described the selloff as the strongest sign to date that the mood on the trade of the decade is shifting, with worries that rising interest rates could curb a spending spree bigger than America's railroad boom. Damien Boey, portfolio strategist at Wilson Asset Management in Sydney, said:
The most important development has been not just bond yields going up, but the volatility for bonds... and that's starting to work its way out through asset pricing across the board.
Samsung's quarterly results in the week of 5 October had seemed to steady its shares, according to Frankfurter Allgemeine, before the new sell-off began.