Samsung and SK Hynix fall as much as 11.71%, triggering South Korea trading curb
Key Facts
SK Hynix shares fell as much as 11.71% and Samsung Electronics shares as much as 9.98% in early Seoul trading on Friday, November 6, as a sell-off in AI stocks spread to chipmakers. The KOSPI fell more than 8%, prompting the Korea Exchange to activate a 20-minute trading curb and temporarily suspend trading in stocks and derivatives. The moves reflected investor concerns that a slowdown in data-center investment could weigh on AI-related demand. A later reading of the index showed a smaller decline than the drop that triggered the curb. According to the Associated Press, the KOSPI was down 7.4% at 4,985.99 points, while Samsung shares fell 7.9% in morning trading.
The sell-off spread to Japan, where the Nikkei 225 was down 5.7% at 57,576.63 points by midday, after recovering some of its initial losses. Concern extended to credit markets, with SoftBank’s five-year credit default swap spread rising 22 basis points to 466 basis points. Markit data showed the spread had reached its widest level since October 2022, Reuters reported. The move puts the Japanese investment company at the center of concerns over financing AI expansion, alongside chipmakers. The pressure came as Asian markets were broadly lower.
The Associated Press linked the decline in AI stocks to concerns about a slowdown in data-center construction after borrowing costs rose. Delays to these projects could reduce purchases of AI chips and related products and services, raising concern for companies such as Samsung and SK Hynix that benefit from infrastructure expansion. The agency added that Democratic gains in the midterm elections could disrupt some construction projects, while other coverage cited the possibility that governments could impose a temporary pause on building new data centers. The concerns combine financing costs with the prospect of delayed spending, two factors that threaten the pace of demand on which the chip sector is betting. In the backdrop, U.S. market concerns about the AI boom coincided with $3 trillion being wiped from the market value of S&P 500 companies in Thursday’s session, November 5.
An Associated Press report said Thursday’s losses erased the gains U.S. stocks recorded on Wednesday, their best session in three months. In South Korea, foreign investors sold 1.1 trillion won worth of shares on Friday, while individual and institutional investors bought, helping the index pare its losses. Still, the KOSPI remained 43% below its June peak, despite holding gains of 23% since the start of the year, Reuters reported. John Kwang-woo, chairman of the World Economy Research Institute and former head of Korea’s National Pension Fund, said, "The market may be overreacting to the midterm election result." The figures highlight the gap between foreign selling and the daily decline on one hand, and accumulated gains since the start of the year on the other.
Samsung’s outlook for AI-related chip demand offers a counterpoint to near-term market concerns. The company said it expects demand for these chips to accelerate through 2027, outstripping supply as customers expand AI infrastructure. It also expected the semiconductor sector to remain strong in 2027, driven by continued record investment in AI and supply constraints, with memory demand significantly exceeding supply. The outlook puts continued demand growth alongside risks raised by borrowing costs and the possibility of delayed data-center construction. In a market update, an analyst at Mirae Asset Securities said the focus would be on whether "heavy foreign selling will ease" and how much actual AI investment would be delayed.