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SK Hynix fell 11% and Samsung 9% as the KOSPI dropped over 7%, with AI stocks hit by rate and inflation fears before Asian chipmakers rebounded Friday.
- SK Hynix fell about 11% and Samsung Electronics about 9% in Seoul on Thursday.
- The KOSPI briefly lost more than 7%, its steepest intraday slide in years.
- Fears of costlier borrowing and persistent inflation drove the sell-off. Asian chip stocks recovered on Friday.
Lead
South Korea's chip giants led a violent sell-off in AI stocks on Thursday, October 15, as investors worried that higher borrowing costs and hot inflation would slow spending on artificial intelligence infrastructure. SK Hynix (000660.KS) fell about 11% and Samsung Electronics (005930.KS) about 9%, and the KOSPI briefly dropped more than 7%. Asian semiconductor shares rebounded on Friday, recovering part of the damage.
What Happened to SK Hynix and Samsung?
The two memory makers fell 11% and 9% in Seoul, a combined loss that wiped out hundreds of billions of dollars in market value and dragged the KOSPI toward bear-market territory at the session's low.
The two companies carry heavy weight in the index, so their declines translated directly into the benchmark's slide. SK Hynix is a leading supplier of high-bandwidth memory, the specialized chips paired with Nvidia (NVDA) accelerators in AI data centers. Samsung competes in the same segment while also producing conventional memory and smartphones.
The rout spread across the region. Japan's SoftBank Group (9984.T), a heavy investor in AI projects, fell nearly 8%. Chip-equipment makers such as Advantest and Tokyo Electron also sold off sharply.
Why Did AI Stocks Sell Off So Sharply?
AI stocks fell because a hotter-than-expected U.S. inflation reading on October 14 reduced expectations for near-term federal reserve rate cuts, raising the cost of the debt financing behind the AI build-out.
Much of the current data-center expansion is funded with borrowed money, and valuations in the sector rest on years of rapid spending growth. Higher interest rates raise financing costs for hyperscalers and their suppliers, and they lower the present value of distant earnings. That combination hits memory and equipment makers hardest, since their orders depend directly on customers' capital budgets.
The move also exposed how crowded the trade had become. South Korean chipmakers had been among the strongest performers of the year, which left them vulnerable to forced selling once sentiment shifted.
How Did Asian Chip Stocks Rebound on Friday?
Asian chip stocks rebounded on Friday as bargain hunting and a pause in the sell-off lifted the heavily sold-off names, though the recovery left most of Thursday's losses unrecovered.
Buyers returned to SK Hynix, Samsung and the Japanese equipment makers after the steep one-day drop. The bounce stabilized the KOSPI but did not settle the underlying question of whether AI spending can hold up under tighter financial conditions.
What Comes Next for AI Stocks?
The next test for AI stocks is whether the inflation data and bond yields keep the Fed on hold, and whether large technology customers reaffirm their capital spending plans in upcoming earnings reports.
Three variables will drive near-term direction:
- Rates: Further upside surprises in inflation would extend pressure on leveraged AI spenders and their suppliers.
- Capex guidance: Third-quarter earnings from U.S. technology giants will show whether data-center budgets are intact.
- Positioning: Volatility in leveraged semiconductor products such as SOXL and funds such as SMH will indicate whether the sell-off has cleared excess exposure.
Outlook
Thursday's sell-off showed how closely the AI trade is tied to the rate outlook. The Friday rebound steadied Asian markets, but SK Hynix, Samsung and the KOSPI remain sensitive to the next inflation print and to any change in AI spending plans. Over the next three to twelve months, the pace of capital expenditure by cloud providers and the path of borrowing costs will decide whether memory makers recover their lost ground.
