SoftBank Plunges as Nvidia-Linked Sell-Off Hits Asian Chip Stocks

Asian chip stocks experienced a broad sell-off Friday, triggered by a significant decline in SoftBank shares in Tokyo. This pullback followed a sharp overnight drop in Nvidia’s stock price, which defied the company’s stronger-than-expected earnings report and optimistic future projections.

SoftBank, which recently divested its Nvidia holdings for $5.83 billion, plunged over 10%. Despite this sale, the tech conglomerate retains control of Arm, the British semiconductor firm crucial to Nvidia’s operations. Arm provides Nvidia with fundamental chip architecture and designs, highlighting the intricate dependencies within the global semiconductor ecosystem. Beyond Arm, SoftBank’s involvement in AI ventures leveraging Nvidia’s technology, such as the ambitious $500 billion Stargate project aimed at constructing advanced data centers in the U.S., underscores the entanglement between the two companies.

South Korea’s SK Hynix echoed this downward trend, registering a near 10% decline. The memory chip manufacturer is a key supplier to Nvidia, providing high-bandwidth memory essential for advanced AI applications. Competition in the memory market also felt the sting. Samsung Electronics, another significant memory supplier to Nvidia and a direct competitor to SK Hynix, saw its shares fall by over 5%.

The ripple effects extended to Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker and the primary manufacturer of Nvidia’s chip designs. TSMC’s stock dipped by over 4% in Taipei Thursday, reflecting the market’s sensitivity to Nvidia’s performance and its implications for the entire semiconductor value chain. Even Hon Hai Precision Industry, widely known as Foxconn, which manufactures server racks optimized for AI workloads, experienced a 4.86% decrease.

This widespread retreat in major Asian semiconductor stocks follows Nvidia’s 3% decline in the U.S., despite reporting third-quarter earnings that surpassed Wall Street expectations.

Nvidia’s guidance for the fourth quarter also exceeded expectations, projecting sales that could potentially boost earnings forecasts across the semiconductor industry. However, recent economic headwinds have introduced some uncertainty.

According to Billy Toh, regional head of retail research at CGS International Securities Singapore, the Nvidia dip is a reflection of multiple converging pressure points. These include a recent selloff in Bitcoin, the speculation surrounding the Federal Reserve and a potential shift in interest rate adjustments, and a general tightening of financial conditions. These factors, he argues, combined with persistent discussions of a potential AI bubble, create a risk-averse environment.

The downturn extended to smaller chip players across Asia. Renesas Electronics, a crucial Nvidia supplier headquartered in Tokyo, fell approximately 3%. Similarly, Tokyo Electron, which provides essential chipmaking equipment to foundries that produce Nvidia’s chips, experienced a more significant drop of 6.6%. Another Japanese chip equipment manufacturer, Lasertec, also saw its stock price decline by 5.2%. These movements highlight the interconnectedness of the semiconductor supply chain and the broad market’s sensitivity to fluctuations in key players like Nvidia.