- AI sell-off intensifies, driving South Korea’s stock market down to its lowest level in three months.
- Investors continued to ditch chip stocks on Tuesday, amid rising concerns about the huge amount of borrowing among AI companies to fund their datacentre expansion plans.
- Analysts attributed the sell-off to renewed worries over AI investment spending, and competition from cheaper Chinese companies, after that China has begun mass production of homegrown deep ultraviolet (DUV) chip-making tools.
- On Monday, shares in the Chinese memory chip maker CXMT rose by 466% when it floated on the Shanghai stock exchange.
- The Wall Street Journal reported that Nvidia was in discussions with OpenAI about providing $250bn (£188bn) for a massive datacentre project in Ohio.
- The market reaction to the Nvidia news was swift; Nvidia fell 5% and closed the session below the $200-per-share mark.
- Nvidia’s five-year CDS spiked, suggesting that it may not yet be the right time to buy the dip.
South Korean chip stocks are facing a significant sell-off, with Samsung and SK Hynix both dropping over 10%. This decline is attributed to rising concerns over AI investment and increasing competition from Chinese firms, which are producing cheaper alternatives.
The Kospi index has fallen to its lowest level in three months, reflecting a broader trend in the market as investors react to the intensified sell-off in AI stocks. Analysts have pointed out that the fears are compounded by the huge borrowing among AI companies to finance their datacentre expansions.
In a notable development, shares of the Chinese memory chip maker CXMT surged by 466% upon its debut on the Shanghai stock exchange, highlighting the competitive pressure on South Korean firms. Additionally, China has commenced mass production of homegrown deep ultraviolet (DUV) chip-making tools, further intensifying the competition.
The market's reaction to these developments has been swift, with Nvidia also experiencing a 5% drop in shares, closing below the $200-per-share mark. This has led to speculation that it may not be the right time to invest in AI stocks, as indicated by the spike in Nvidia’s five-year CDS rates.6
“Investors are increasingly concerned about the significant borrowing by AI companies for datacentre expansions, contributing to the sell-off. Additionally, analysts note that competition from cheaper Chinese firms, particularly with CXMT's recent 466% share rise, is exacerbating the situation.”
The Guardian
