Asian Chip Stocks Slide as Fed Rate Fears, AI Funding Concerns Rattle Tech

Asian Chip Stocks Extend Losses

South Korean chip giant SK Hynix plunged over 10% on Thursday, while rival Samsung Electronics fell 7.1%. Other South Korean chip-related stocks also came under pressure, with LG Innotek sinking 8.1%, Seoul Semiconductor shedding 7.7% and Samsung SDI declining 6.8%.

In Japan, technology investment giant SoftBank Group tumbled 7.9%. Semiconductor testing equipment maker Advantest dropped 6.9%, while chipmaking equipment supplier Tokyo Electron lost 5.4% and Renesas Electronics declined 5.4%.

The sell-off in global technology hardware stocks deepened as Asian chipmakers tracked Wall Street losses, with concerns over further Federal Reserve interest rate hikes and the financing of artificial intelligence investments weighing on sentiment.

Financing Concerns Cloud AI Boom

Investors grew increasingly concerned that higher borrowing costs could weigh on the massive capital spending required to build out AI infrastructure, putting pressure on technology companies that have benefited from the AI investment boom.

The declines followed a bruising session on Wall Street, where technology shares led broader market losses after hotter-than-expected U.S. inflation data fueled concerns that the Federal Reserve could raise interest rates further. The tech-heavy Nasdaq Composite dropped 1.88% to close at 26,692.87, while the S&P 500 shed 1.11% to end at 7,718.94 and the Dow Jones Industrial Average slipped 0.09%.

Chief executives of Broadcom and Intel warned on Monday that financing could become a major headwind to the AI boom, with Broadcom CEO Hock Tan saying it could be a bigger challenge to AI expansion than shortages of chips or electricity.

Analysts See Buying Opportunity

Dan Ives, tech analyst at Yorkville Ives, said the latest sell-off in AI-related stocks reflects growing concerns over the cost of financing massive infrastructure projects as U.S. Treasury yields climb above 5%, but added that underlying demand for AI computing power remains robust.

"Higher yields raise the cost of financing these builds, and investors are right to focus on balance sheets and contract structure, but rates are a financing question, not a demand question," Ives said in a note. He called the latest pullback a buying opportunity, adding that the AI infrastructure boom remained in its early stages despite mounting concerns over funding costs.

Ives said the view would change on a demand signal, not a rate signal, pointing to potential cuts in hyperscaler capital expenditure plans, canceled contracts or falling GPU rental prices as warning signs.

Sources: CNBC · Techmeme