The sharp sell-off follows soaring valuations and massive capital spending on data centers, leaving investors questioning whether future AI sales and margins can justify soaring investments.
South Korean Circuit Breakers Triggered as Major Chipmakers Slump
Trading on South Korea’s benchmark Kospi index was paused temporarily on Tuesday morning after sliding by 8%. The index fell further after the twenty-minute halt was lifted to trade around 10 percent lower, led by severe drops in technology giants Samsung Electronics and SK Hynix.
The tech-heavy Kospi has experienced extreme volatility this year, having been halted eight times so far this year under a stock market mechanism known as a circuit breaker, which is designed to calm panic selling. While the index had more than doubled from the start of the year to mid-June, it has since lost roughly a third of its value amid heavy participation from retail investors.
Samsung Reports Record Profits While Investors Lock In Gains
Samsung Electronics stock slumped in Asia, leading a broader decline in chip stocks as investors took profits from the AI-fueled rally. The South Korean memory maker reported a preliminary operating profit of about $58 billion for the April–June quarter, marking a 19-fold jump from a year ago that exceeded analyst expectations.
Despite the impressive earnings report, Samsung stock fell as much as 10 percent in Seoul as investors locked in profits after the shares had surged nearly 150% this year. Deutsche Bank analysts noted the market reaction in a morning note.
Global Semiconductor Markets Reel From Wall Street to Tokyo
The sell-off extended far beyond the Korean peninsula. Japan’s Nikkei 225 index, also dominated by technology companies, was almost 4.5% lower on Tuesday morning.
In the United States, memory chip giant Micron sank more than 4 percent, while Sandisk and Western Digital also fell more than 7%. On Monday, US-listed shares in SK Hynix fell by 7.5 percent to well below the $149 offer price when it made a record-breaking debut on the Nasdaq on 9 July.
Nvidia Shifts Crown and Faces Valuation Questions
The downward pressure followed a 5 percent decline for artificial intelligence chip giant Nvidia in New York on Monday, meaning it lost its position as the world’s most valuable listed company to Apple. Nvidia shares fell after reporting revealed the company is in talks to provide around $250bn for OpenAI as part of a massive data-centre project.
Samsung, SK Hynix, and Micron topped a $1 trillion valuation in May before pulling back amid growing concerns that the artificial intelligence trade may be in a bubble. David Morrison, senior market analyst at Trade Nation, highlighted investor sentiment regarding long-term sustainability.
David Morrison, senior market analyst at Trade Nation, stated that it seems investors are concerned that semiconductor and other AI-adjacent stocks may struggle to maintain such high levels of sales and margins going forward.
Supply Bottlenecks and Long-Term Market Projections
Investors continue to watch Samsung, SK Hynix, and Micron closely as they have become a bellwether for the AI trade. A critical bottleneck in the supply of high-bandwidth memory for data center chips has sent shares soaring this year, with Wall Street seeing supply constraints well into 2027.
As governments and corporations spend hundreds of billions of dollars on developing AI capabilities, whether these massive investments will yield adequate returns remains the central question facing the sector. Samsung remains the world’s largest memory manufacturer, leading in both DRAM and NAND flash production.
