AI trades hit a "fragile moment"! Japanese and South Korean stock markets suffer "Black Tuesday," with SK Hynix, Samsung, and SoftBank all plunging.

On Tuesday, Asian tech stocks suffered a new round of systemic selling, as weakness in the U.S. semiconductor sector overnight transmitted to Asia-Pacific markets, with concerns over increasingly fierce competition from Chinese memory chipmaker ChangXin Memory Technologies' technological breakthroughs, AI capital expenditure returns, and the financing environment fermenting in a concentrated manner. Data showed that both South Korean and Japanese stock markets experienced sharp declines, with South Korea's Kospi index plunging about 6% and the Nikkei 225 falling more than 2%. Investors accelerated their exit from AI and memory chip stocks that had performed strongly this year ahead of the key earnings season and U.S. inflation data. In the South Korean market, SK Hynix (SKHY.US) shares plummeted more than 8% intraday, while Samsung Electronics fell 7.9%, both hitting their lowest intraday levels since August. This followed reports that ChangXin Memory Technologies had made progress in next-generation technology to increase memory density and was considering launching server memory products based on that structure before the end of the year. The news intensified market concerns about the competitive landscape, pricing power, and profit margins in the memory chip sector. Pepperstone analyst Chris Weston pointed out that China is continuously narrowing the competitive gap with U.S. companies in AI models, humanoid Siasun Robot & Automation, memory, and other technology supply chains, and its ability to develop more competitive products at lower costs is challenging existing assumptions about market share, pricing power, and the durability of profit margins. Japanese tech stocks also came under pressure. SoftBank Group fell about 8%, leading declines in Japan's semiconductor and electronics sectors due to its large exposure to the global AI industry. Kioxia plunged more than 12%, Tokyo Electron and Renesas Electronics fell about 6%, and Advantest, Lasertec, and Disco dropped about 5%. Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) fell nearly 2%, dragging Taiwan's stock market down more than 2%. Stock markets in Hong Kong, mainland China, Australia, and New Zealand also recorded significant declines. AI Sentiment "Fragile" This round of selling followed overnight weakness on Wall Street. The Nasdaq Composite fell 0.44% on Monday, Micron Technology, Inc. (MU.US) dropped nearly 4%, and SanDisk (SNDK.US) fell 6%. The global tech sector had only just been slowly recovering from a summer rout that wiped out trillions of dollars in market value due to elevated valuations and uncertainty over the timing of returns on massive AI investments. Vey-Sern Ling, senior equity advisor at Union Bancaire Privee, said investor sentiment is tense, and they are looking for excuses to take profits on AI-related stocks that have performed well this year, especially memory stocks. Phillip Wool, chief market strategist at Rayliant Global Advisors, believes that ChangXin Memory Technologies' breakthrough is an important milestone for Chinese chipmakers, showing they can overcome technical restrictions and may challenge established players earlier than expected; however, the market reaction is disproportionate to the direct competitive threat, because ChangXin Memory Technologies has not yet demonstrated large-scale production capacity and its market share still lags behind Samsung and SK Hynix. He emphasized that the current discussion does not even involve HBM, a field where South Korean chipmakers still hold undisputed dominance and face almost no threat from players like ChangXin Memory Technologies for the foreseeable future. Therefore, he prefers to interpret this sharp decline as a sign that AI sentiment is very fragile at the moment, and warned that volatility may persist as investors reassess chip demand and how long semiconductor manufacturers can maintain pricing power. Meanwhile, the sustainability of the AI business model has once again become a focus. Broadcom Inc. (AVGO.US) CEO Hock Tan compared recent investor frenzy over AI to gambling, saying that "many investors don't know what they're investing in," setting extreme expectations only to find themselves almost like being in a casino. He also warned that the industry has not yet found a sustainable model, and mentioned that ChatGPT developer OpenAI has reported billions of dollars in losses. Hock Tan said OpenAI is still losing money because training expenses are enormous, and beyond the substantial potential revenue growth from providing frontier generative AI models, nothing more can be said at this stage. It is understood that OpenAI reported annualized revenue of $50 billion in September, which was seen as a signal that the business model is viable, but long-term guarantees are limited. Pepperstone's Weston added that the financing needs behind the AI buildout are becoming an increasingly important consideration for investors, especially as issues of capital intensity and future returns become more prominent. Intel Corporation (INTC.US) CEO also previously warned that even if demand for computing infrastructure continues to outpace supply, access to capital could become a major headwind for the AI boom. Traders are watching earnings from large tech companies this month and next, as well as U.S. inflation data, to gauge the AI industry outlook and the interest rate path; interest rates are typically inversely correlated with growth stocks. In addition, the Middle East situation and the oil market have also drawn attention. Several strong explosions occurred in Riyadh on Monday evening local time, after Houthi forces launched a series of recent attacks on Saudi Arabia's capital airport, killing at least 18 people. A Houthi official warned the United States on Monday that it would face a "painful response" if it intervened in the Yemen war, following reports that Saudi Arabia had asked Washington for assistance in dealing with the group. Yemen's civil war reignited in July, with the Saudi-led military coalition supporting the government against the Iran-backed Houthis, and the broader regional conflict has disrupted energy markets and plunged the Middle East into crisis. The Houthis quickly targeted Saudi oil facilities, tankers, and transportation Hub Group, Inc. Class A, including a series of deadly strikes on Riyadh airport, dealing a blow to the world's largest oil exporter. Nevertheless, the two major crude oil contracts still fell more than 1% on Tuesday, but Brent crude continued to hold above $100, posing persistent upward pressure on global inflation.