Asian tech stocks extend the overnight decline of US chip stocks! SK Hynix drops over 10%, Samsung Electronics falls over 8%

According to Zhitong Finance APP, the impact of the overnight sell-off in US chip stocks spilled over into Asian markets, leading to a collective sharp decline in Asian chip stocks on Thursday. Among them, SK Hynix, listed in Seoul, once plunged more than 11%, completely erasing the previous trading day's 8% gain, and was still down over 10% at the time of writing. Earlier this week, the stock set a record for its largest single-day drop, partly due to increased concerns about the outlook for artificial intelligence (AI) spending, prompting investors to take profits. Meanwhile, Samsung Electronics shares fell more than 8%, Seoul Semiconductor dropped more than 5%, LG Innotek slipped about 1%, and Samsung SDI dropped over 2%.

The weakness in chip stocks quickly spread throughout Asia. In Japan, AI-related equipment manufacturer Advantest saw its share price drop more than 6%, SoftBank Group declined nearly 7%, Tokyo Electron fell more than 5%, and Renesas Electronics was down 4%.

The decline in Asian chip stocks extended the overnight sell-off of the US semiconductor sector. Micron Technology (MU.US) fell 8%, Intel (INTC.US) declined more than 4%, while Lam Research (LRCX.US) and AMD (AMD.US) both dropped around 3%.

Rolf Boerke, Head of Semiconductor & Infrastructure Equity Research at Futurum Group, stated: “Today’s drop is mainly a continuation of the overnight move in US markets.” He pointed out that news such as New York State's proposed moratorium on data center construction, and reports that CoreWeave is considering hedging measures in response to possible future memory price decreases, have slightly negatively impacted market sentiment.

On Tuesday, New York Governor Kathy Hochul ordered a halt to new large data center projects until the state enacts stricter regulations regarding data center energy use, water consumption, and environmental impact. US President Trump publicly criticized Hochul's decision to suspend new large data center approvals on Wednesday, calling the policy “a bad decision” and urging New York to revoke the ban immediately. The debate between the two sides over AI infrastructure development and energy costs has further intensified.

However, Boerke noted that the recent market weakness reflects more of a profit-taking move after previous strong gains, rather than a deterioration in industry fundamentals. He added that the structural demand for AI infrastructure and storage chips remains intact.

It is worth noting that the recent chip sell-off occurred just as ASML (ASML.US) announced strong results. The Dutch chip equipment maker raised its full-year sales guidance for the second time this year, now expecting annual revenue of 43 to 45 billion euros, above analyst expectations, and unveiled further plans to expand its extreme ultraviolet (EUV) lithography production capacity.

Luis Kondratiev, a trader at XFUNDs, said that the recent pullback reflects that, driven by the ongoing AI rally, the semiconductor sector’s trading has become overcrowded. He stated: "Currently, the semiconductor sector accounts for about 20% of the S&P 500’s weight, an extremely hard share to maintain long term." He pointed out that back in the 2000 internet bubble, the semiconductor sector's share of the S&P 500 was only just over 8%, while the historical average is usually between 2% and 5%.

He also noted that, although corporate earnings growth remains strong, as investors reassess excessive valuations, maintaining such gains may become increasingly difficult in the future. He added: “Earnings growth momentum has been extremely strong, but mainly concentrated in the semiconductor industry. As valuations gradually return to reasonable levels, this growth momentum could begin to slow.”

In addition, the latest fund manager survey released by Wall Street giant Bank of America shows that global investors aggressively buying stocks should actively consider reducing their exposure to risk assets. The core view of Bank of America’s strategist team is not that global tech stocks or the AI computing sector’s fundamentals are about to turn downward, but that investors’ extreme optimism, bullish stock positioning, strong profit expectations, and ongoing valuation expansion have seriously overdrawn basic growth prospects for the next 1-2 years. This has significantly worsened the marginal risk-reward of risk assets, as evidenced by the sharp drop in fund managers' cash allocation from 4.1% to an extremely low 3.6%, and the bull-bear index hitting a pessimistic score of 9.4 out of 10.

Therefore, Bank of America’s strategist team, led by Michael Hartnett, known as “the most accurate strategist on Wall Street,” recommends adopting a wait-and-see attitude for now, minimizing equity and high-beta exposures as much as possible. Their latest forecast essentially reminds investors that while the long-term trend for the AI compute theme remains intact, the semiconductor sector faces risks due to extreme crowding in trades, high leverage, low cash buffers, pricing in of mid- to long-term growth and capital spending cooling, which could suppress the summer market and amplify any valuation pullback triggered by even minor negative news.