Chip Stocks Tumble as AI Buzz Sends Markets on a Wild Ride

Shares of major computer chip companies have dropped sharply in both the United States and Asia, as investors grow nervous about the future of artificial intelligence and the large amounts of money being spent on it. In South Korea, the main stock market index, called the Kospi, fell so quickly on Tuesday morning that trading was paused for 20 minutes. After trading resumed, the Kospi continued to fall and ended the day down by 10. 8 percent. The biggest losses were seen in technology companies, with Samsung Electronics and SK Hynix both losing more than 13 percent of their value. This sell-off followed a 5 percent drop in Nvidia’s stock price in New York on Monday, which caused Nvidia to lose its spot as the world’s most valuable company. Apple, the maker of the iPhone, took over as number one.

The Kospi has been stopped several times this year by a system called a circuit breaker, which is meant to prevent panic selling. Earlier in the year, the Kospi had more than doubled in value, but since mid-June, it has lost about a third of its gains. The South Korean stock market has been especially unstable lately, with prices going up and down quickly. On Monday, SK Hynix’s shares, which are also traded in the US, fell by 7. 5 percent, dropping below the price offered during its recent stock sale. In Japan, the Nikkei 225 index, which is also full of technology companies, closed almost 4 percent lower. Jane Sydenham, an investment director at Rathbones, said the Asian market’s drop came after months of big gains. She explained that the Korean market is very focused on a few companies like Samsung and SK Hynix, so when they fall, the whole market is affected. Many Korean investors also buy stocks with borrowed money, which makes price changes even bigger when the market goes down.

The main reason for the sell-off was Nvidia’s stock falling after reports that the company might spend around 250 billion dollars to help OpenAI build a huge data center. Apple’s stock, on the other hand, has gone up by about 25 percent this year, making it more attractive to investors who are worried about the high costs of AI. Some experts say Apple is not as involved in the AI race as other tech companies, which makes it a safer choice for some investors. There are also concerns about growing competition from China. Jun Bei Liu, who runs an investment firm, said that some investors are selling their stocks now to take profits but may buy them back after the US holiday season. In China, the largest memory chip maker, ChangXin Memory Technologies, saw its shares jump by nearly 470 percent when it started selling them to the public. The company plans to use the money to increase production and do more research. CXMT makes memory chips used in AI data centers, phones, and computers. In Europe, stock markets did not react as strongly to the AI worries. The main markets in the UK, France, and Germany went up slightly, as they are less involved in AI technology.