Chip War Heats Up as China Fears Drag Down South Korean Tech Giants

Shares of Samsung Electronics and SK Hynix plunged on Tuesday, triggering heavy pressure on the South Korean stock market. Samsung Electronics, the country’s largest memory chip producer, fell 13.4%, while SK Hynix dropped 14.7%. The decline for Samsung was its worst in nearly two decades. The massive sell-off dragged the benchmark KOSPI index down by 10.8%, marking its largest daily decline since early March, during a period of conflict between the United States and Iran.

Investors are increasingly concerned about the financing of artificial intelligence (AI) infrastructure, high valuations of semiconductor stocks, and intensifying competition from China. Reports regarding the development of domestic deep-ultraviolet (DUV) lithography equipment by Chinese firms have reignited fears that Chinese memory chip producers could expand their production capacity more rapidly than expected.

Pressure on SK Hynix was also evident in the US market, where its shares closed 7.5% lower at US$143.02 on Monday. This marked the first time the stock has traded below its initial listing price of US$149 since its debut on the Nasdaq earlier in July. As a key supplier of high-bandwidth memory (HBM) chips to Nvidia, SK Hynix’s financial performance is highly sensitive to expectations surrounding AI spending and demand for advanced processors. The company is scheduled to announce its financial results on Wednesday, its first earnings report since listing on the Nasdaq.