SoftBank Sinks as Asia Chip Stocks Follow Wall Street’s AI Sell-Off

Asian technology stocks experienced a significant downturn on Friday, as a renewed sell-off in U.S. semiconductor shares reverberated across the region. This sharp decline highlights escalating investor concerns regarding the sustainability of current artificial intelligence (AI) spending levels and the valuations commanded by companies at the forefront of this technological revolution.

The ripple effect from Wall Street’s precipitous drop in chip-related equities was palpable. SoftBank Group, a major investor in technology and a key player in the AI ecosystem, saw its shares plummet by 9.2%. Similarly, Tokyo Electron, a leading manufacturer of semiconductor production equipment, tumbled 9%, while Advantest, a prominent testing equipment provider, shed 9.4%. These substantial losses underscore a growing skepticism about the long-term trajectory of AI-driven capital expenditures.

Further compounding the woes in the semiconductor sector, Kioxia, a Japanese memory chipmaker, experienced a brutal decline of over 14%. This sharp fall followed a federal jury in Texas ruling on Thursday that found the company liable for infringing a Viasat patent related to computer memory technology, ordering Kioxia to pay $229 million in damages. This legal setback serves as a stark reminder of the intellectual property risks inherent in the highly competitive tech landscape.

While South Korea’s markets were closed for a public holiday, the impact was felt. Earlier in the week, shares of SK Hynix, a major memory chip producer, had already closed down more than 11%, signaling broader anxieties within the sector.

Even Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chip manufacturer and a bellwether for the industry, faced headwinds. Despite posting a strong jump in quarterly profit that exceeded market expectations, its shares fell 3.64% on Friday. Investors appeared to be prioritizing macro concerns over the company’s immediate financial performance, suggesting a broader recalibration of expectations for the sector.

Chinese technology giants also succumbed to the prevailing market sentiment. In Hong Kong, Tencent saw its shares dip 1.3%, Meituan declined by 2.4%, and Kuaishou lost 3.3%. Baidu and Alibaba, two other titans of the Chinese internet landscape, eased 0.7% and 1.3% respectively, reflecting a general risk-off sentiment among investors in Asian tech.

These Asian market declines mirrored a weaker session for U.S. technology stocks. The Nasdaq Composite Index fell 1.47%, with semiconductor shares bearing the brunt of the selling pressure. The VanEck Semiconductor ETF, a benchmark for the sector, dropped nearly 4%. Notable decliners included Arm Holdings, which fell over 5%, and major chip designers and manufacturers such as Micron Technology, Advanced Micro Devices, and Broadcom, all of which lost more than 5%. U.S.-listed shares of SK Hynix also slumped over 13%.

TSMC’s recent announcement of an increased full-year capital expenditure forecast, projecting between $60 billion and $64 billion, up from a previous range of $52 billion to $56 billion, initially suggested robust demand. However, rather than boosting investor confidence, this aggressive investment outlook appears to have amplified concerns about the industry’s capacity to sustain such high levels of spending. The market’s reaction indicates a growing apprehension that the current investment cycle, fueled by the AI boom, may be becoming increasingly difficult to justify from a long-term profitability standpoint.

“Another wipe out for U.S. tech and AI, with recent momentum winners taking another leg lower after TSMC’s earnings yesterday in Asia were not seen as strong enough to justify further upside for the sector and raising concerns over excessive spending,” observed Andrew Jackson, a strategist at Ortus Advisors. Jackson characterized the sell-off as a reflection of an unwinding of crowded AI momentum trades rather than a fundamental deterioration in the sector’s long-term prospects.

This latest wave of selling pressure extends a significant reversal in global AI-related equities, which had enjoyed months of exceptional gains. Investors are now increasingly scrutinizing whether the lofty valuations achieved during the AI frenzy can be sustained, especially as the substantial investments in AI infrastructure continue to accelerate. The market is grappling with the fundamental question of when and how the current surge in AI adoption will translate into sustainable, profitable growth across the entire value chain.