A fresh wave of selling swept through Asian stock markets on Tuesday, inflicting severe damage on technology and semiconductor shares and sending major indexes in Seoul and Tokyo tumbling. The sell-off was amplified by emerging reports that a Chinese firm has begun mass production of specialized chip manufacturing technology long controlled exclusively by Dutch industry leader ASML, stoking new fears that the multi-year AI-driven boom in chip stocks may be nearing its end.
South Korea’s benchmark Kospi index plummeted 10.2 percent to close at 6,066.21, with trading halted for 20 minutes mid-session when a market circuit breaker was triggered. Two of the country’s largest chipmakers, SK hynix and Samsung Electronics, suffered near-13 percent single-day losses, and both firms have now shed almost half their value since hitting all-time highs just last month. The Kospi itself has fallen more than 30 percent from its recent peak.
The sell-off spread quickly across East Asia. Japan’s Nikkei 225 dropped 4.3 percent to 62,159.48, with domestic semiconductor players bearing the brunt of the losses: memory chip maker Kioxia fell 18 percent, while testing equipment manufacturers Advantest and Tokyo Electron both closed 11 percent lower. In Taipei, the local market index slid more than 4 percent dragged down by leading contract chip manufacturer TSMC. Most other regional markets also closed in negative territory, with only Hong Kong’s Hang Seng index ending the day flat.
Tuesday’s sharp downturn in Asia extended a global sell-off that began on Wall Street the previous session. The Philadelphia Semiconductor Index fell 2.2 percent in New York, with storage firm Sandisk dropping 11 percent and major AI chip suppliers Advanced Micro Devices and Nvidia each losing around 5 percent. In Amsterdam, ASML shares shed more than 8 percent following the news of the Chinese production breakthrough.
Market analysts note that the AI-driven chip rally had already been showing signs of fracturing in recent weeks. Investors have grown increasingly concerned about the massive volumes of capital poured into AI development, with growing questions over when those investments will translate into meaningful profits, and sky-high valuations across the sector have long raised red flags among market watchers.
“The immediate fundamentals of semiconductors have not collapsed,” wrote Stephen Innes, market strategist at SPI Asset Management, in a research note Tuesday. “Demand for high-bandwidth memory remains strong, hyperscalers are still spending, and the largest technology companies have not yet abandoned their capital expenditure plans.” Innes added that the shift in market sentiment stems from changing investor willingness to value future growth promises at any cost: “The AI trade spent the past several years behaving like a flywheel: rising equity values encouraged more spending, more spending validated higher earnings expectations, and those expectations pushed valuations higher again. Now that same wheel is beginning to throw investors off at speed.”
All eyes are now on upcoming corporate earnings reports this week, with results due from SK hynix, Samsung, Kioxia, and U.S. tech giants Microsoft, Meta, Apple and Amazon. Investors are hoping the reports will provide clarity on whether the current sell-off reflects a genuine shift in industry fundamentals or an overcorrection after years of relentless gains.
The severe downturn in tech stocks overshadowed growing optimism around de-escalation in tensions between the United States and Iran. For a third consecutive day, the two sides paused tit-for-tat retaliatory strikes that began after a diplomatic breakdown over Iran’s blockade of the Strait of Hormuz. Former U.S. President and leading candidate Donald Trump said Tuesday he believes there is a “good chance” a diplomatic deal can be reached to end the hostilities that began in late February. “I have a lot of patience… We’ll see what happens,” he told reporters aboard Air Force One. Reports also emerged that Oman is mediating talks between Iran and international stakeholders to reopen the Strait of Hormuz, a critical chokepoint through which roughly one-fifth of global oil and LNG shipments pass. Hopes for a diplomatic resolution have already pushed down global oil prices: Brent crude fell more than 8 percent on Monday, and WTI dropped more than 7 percent. Both benchmarks extended losses in Asian trade on Tuesday, with Brent down 1.7 percent to $86.89 per barrel and WTI down 1.8 percent to $81.15 per barrel.