Global Semiconductor Stocks Hit by 'Black Tuesday' as AI Investment ROI and Financing Risks Trigger Market Sell-Off

Global semiconductor stocks faced significant selling pressure on Tuesday (28th), as market sentiment deteriorated amid investor concerns over the sustainability of the artificial intelligence (AI) boom.

South Korea's Kospi index was hit hardest, plunging nearly 11%—its largest single-day drop since 1998—triggering the year's eighth circuit breaker after falling over 8%. Memory chip giants Samsung Electronics and SK Hynix both saw share prices drop more than 13%. Japan's Nikkei 225 index fell nearly 4%, with Kioxia closing down over 18%.

The core market pressure stems from doubts over whether massive AI investments can translate into actual profits. Kyle Rodda, Senior Analyst at Capital.com, noted that investors fear excessive capital expenditure will erode corporate returns. Pepperstone strategist Dilin Wu stated that current market standards are extremely high—merely exceeding expectations no longer guarantees stock gains, with some selling driven by traders reducing positions ahead of earnings reports.

Additionally, NVIDIA's (NVDA-US) financing model has drawn scrutiny from credit markets. Reports suggest NVIDIA provided around $250 billion in financing guarantees to OpenAI, raising concerns over a 'circular financing' model where the company funds customers to buy its own chips.

Manish Kabra, Head of U.S. Equity Strategy at Societe Generale, bluntly stated that for hyperscale computing firms, investors should now focus on credit default swaps (CDS) rather than earnings per share (EPS), as AI capital spending has outpaced cash generation.

Advancements in China's semiconductor technology have further deepened market concerns. ChangXin Memory Technologies, China's largest DRAM manufacturer, has officially gone public. Its expansion plans, coupled with reports of Chinese firms beginning mass production of deep ultraviolet (DUV) lithography machines, have prompted a reassessment of the competitive landscape. Hiroshi Namioka, Chief Strategist at T&D Asset Management, believes China's rise in advanced chip production poses a downside risk to Japanese semiconductor equipment makers.

Despite the pessimistic market mood, Fundstrat Research Head Tom Lee remains relatively optimistic. He attributes the current volatility to energy prices and Federal Reserve rate hike expectations, forecasting a short-term market stabilization.

Lee cited Cisco in the 1990s as an example, emphasizing that sharp pullbacks are common during technological transitions, and that the AI trade still holds long-term potential. He referenced Charlie Munger's famous quote, reminding investors that wealth often comes from 'waiting' rather than frequent trading.

Vey-Sern Ling, Managing Director at UBS Wealth Management, stated that the market has shifted from 'greed' to 'fear,' causing investors to interpret all news negatively.