Asian tech shares fall sharply as doubts grow over AI profits

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Asian tech shares fall sharply

Highlights

SK Hynix falls 9.66%, SoftBank loses 8.05%.
Chinese memory advances pressure chip stocks.
AI financing concerns deepen market losses.

The retreat followed Monday's decline in U.S. chip stocks, when Micron Technology lost 3.9% and the Nasdaq Composite fell 0.44%, CNBC reports. Investors were also reacting to reported advances by Chinese memory manufacturer ChangXin Memory Technologies, or CXMT, which raised questions about how long-established suppliers can maintain their technological advantages and profit margins.

South Korean chipmakers lead regional losses

SK Hynix shares fell 9.66% to 1,450,000 won, according to the latest market snapshot, while Samsung Electronics declined approximately 8%. Both companies reached their lowest intraday levels since August as selling intensified across South Korea's semiconductor sector.

The Kospi dropped more than 6%, marking its steepest daily decline since July, while the broader MSCI Asia-Pacific index excluding Japan lost more than 2% and touched its lowest level since late July. Taiwan Semiconductor Manufacturing Company slipped about 1.8%, extending the pressure across the regional chip supply chain.

Japanese technology companies also suffered substantial losses. SoftBank Group dropped 8.05% to 5,336 yen, while chip equipment manufacturer Tokyo Electron fell 6.6% and testing equipment supplier Advantest declined 5.38%. Kioxia Holdings, a major flash memory producer, lost more than 12%, reflecting the particular pressure on memory-related businesses.

Chinese competition raises questions about AI profits

The immediate catalyst was CXMT's reported progress on a memory architecture designed to increase storage density. The Chinese manufacturer is reportedly preparing a new server-memory product for release before the end of 2026, potentially strengthening its position against established international competitors.However, the development does not establish that CXMT can compete directly with South Korean suppliers in high-bandwidth memory, a critical component of advanced AI systems. Large-scale manufacturing capabilities, product reliability and market share remain significant barriers, particularly in the most sophisticated memory categories.

Investors are also questioning the financial sustainability of AI infrastructure spending. Executives at Intel and Broadcom have warned that access to capital could become an increasingly important constraint, even while demand for computing capacity remains substantial.

Earnings and inflation data could determine the next move

The sell-off places greater scrutiny on upcoming results from ASML and TSMC, which could provide evidence of whether semiconductor demand and investment spending remain strong enough to support current valuations. Samsung's recent record earnings have already demonstrated that robust financial performance alone may not reassure investors concerned about future competition.

Attention is also turning to Wednesday's U.S. inflation report and the Federal Reserve's interest-rate outlook. Higher borrowing costs could make debt-financed AI projects more expensive while reducing the appeal of highly valued growth stocks.

The central question for Asian technology markets is no longer simply whether AI demand will expand. Investors increasingly want evidence that semiconductor manufacturers can preserve their pricing power and profitability as competition intensifies and the cost of financing new infrastructure rises.

Earlier, we reported that gold falls below $4,200 ahead of key U.S. inflation report.

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