South Korea’s KOSPI triggered a circuit breaker as concerns over leveraged technology bets, AI financing and rising Chinese semiconductor competition spread across global markets.
MARKET INSIDER — Global equities fell to a one-month low on Tuesday as a sharp sell-off in semiconductor shares spread from Asia to Europe and US premarket trading, raising doubts about whether the extraordinary growth and capital spending associated with artificial intelligence can be sustained.
South Korea’s KOSPI plunged nearly 10% and triggered a circuit breaker, while Samsung Electronics and SK Hynix lost more than 12%. ASML fell 8.5% after reports that China had begun producing domestically developed immersion lithography equipment, adding a new competitive threat to an industry already confronting questions about profitability and leverage.
Key highlights
- The MSCI All Country World Index fell 0.5% to its lowest level since June 29. South Korea’s KOSPI plunged nearly 10%, triggering a circuit breaker.
- Samsung Electronics and SK Hynix fell more than 12%. Nvidia declined 5% on Monday and weakened further in premarket trading.
- ASML dropped 8.5% following reports of Chinese progress in lithography equipment. Markets priced an increased possibility of a Federal Reserve rate rise this week.
- European shares held up better as positive corporate earnings offset some technology losses.
Korean chip stocks lead the rout
South Korea became the centre of Tuesday’s technology sell-off as the KOSPI dropped to a three-month low and activated a circuit breaker designed to slow disorderly trading.
The benchmark had more than tripled during the 12 months through June, supported by enthusiasm for artificial intelligence, memory-chip demand and extensive use of leverage. It has since fallen by more than one-third from its peak and is heading for its worst monthly performance since the 1997 Asian financial crisis.
Samsung Electronics and SK Hynix each fell more than 12% as investors unwound positions built during the sector’s rapid advance.
SK Hynix had been one of the principal beneficiaries of demand for high-bandwidth memory used in AI accelerators. The severity of Tuesday’s decline suggests investors are now reassessing how much future growth was already reflected in valuations and how leveraged positioning could amplify a reversal.
Japan’s Nikkei also fell sharply as the retreat spread across Asian technology markets, Reuters reported.
Nvidia financing report intensifies AI concerns
Nvidia shares fell 5% on Monday and declined further in premarket trading after The Wall Street Journal reported that the chipmaker was discussing approximately $250 billion in financing guarantees connected to an OpenAI data-centre project.
The proposed guarantee would reportedly support construction financing and lease obligations rather than the Nvidia chips installed at the facility. Separate discussions could involve financing as much as $350 billion of OpenAI chip purchases.
The talks remain preliminary and may not result in an agreement. Nevertheless, their reported scale intensified concerns about increasingly circular financing within the AI industry.
Nvidia would benefit from the resulting demand for its processors, but providing financial support for the infrastructure and customers purchasing those chips could expose the company to substantial credit and execution risks. Investors are questioning whether demand generated through such arrangements is as economically durable as demand financed independently by profitable customers.
The potential structure also illustrates how AI infrastructure requirements are expanding beyond the cash flows of model developers and data-centre operators. Hyperscalers are already committing enormous sums to processors, electricity and computing facilities, while evidence of attractive returns remains limited.
China’s semiconductor progress changes the competitive outlook
Pressure on established chip companies intensified after reports that China had started producing domestically developed immersion deep-ultraviolet lithography machines.
These systems are essential for manufacturing advanced semiconductors and represent an area historically dominated by Dutch equipment maker ASML. Its shares fell 8.5% following the report, while other European semiconductor-equipment companies also declined.
China’s new machines reportedly remain under testing and do not yet match ASML’s most advanced products. They therefore do not represent an immediate replacement for the Dutch company’s equipment.
Their production is nevertheless strategically significant. If Chinese manufacturers gradually reduce their reliance on foreign lithography systems, Western suppliers could face slower long-term growth in one of the world’s largest semiconductor markets. China could also become more capable of expanding chip production despite US and Dutch export controls, according to Reuters
CXMT debut adds pressure on Asian memory-chip leaders
The arrival of ChangXin Memory Technologies, or CXMT, on the Shanghai stock market further highlighted China’s growing semiconductor ambitions.
The memory-chip producer raised approximately $8.6 billion in Asia’s largest IPO of 2026 and surged almost 500% during its first trading session. The rally made CXMT China’s most valuable listed semiconductor company, although its restricted tradable float contributed significantly to the extreme move.
CXMT is the world’s fourth-largest memory-chip producer and competes in a market dominated by Samsung Electronics, SK Hynix and Micron Technology. Its ability to raise substantial domestic capital could accelerate investments in manufacturing capacity, research and product development.
For Korean and US competitors, the immediate risk is not that CXMT will suddenly displace them in advanced products. The greater concern is that expanding Chinese production could eventually increase competition, pressure prices and weaken profitability in more mature memory categories.
AI earnings growth faces a credibility test
The sell-off marks a change in the questions investors are asking about artificial intelligence.
Earlier phases of the rally focused on revenue growth and demand for computing capacity. Markets are now examining who ultimately finances that expansion, whether customers can generate adequate returns and how much contingent risk is being transferred to suppliers such as Nvidia.
Companies funding the AI build-out have already faced scrutiny over capital expenditure. The latest decline shows that semiconductor producers are no longer immune simply because they supply the equipment.
Microsoft, Meta Platforms, Amazon and Apple are among the major technology companies reporting earnings this week. Investors will examine their results for evidence that AI products are producing revenue quickly enough to justify spending on chips, data centres and energy infrastructure.
Strong headline earnings may not be sufficient if capital expenditure continues rising faster than cash generation or if management teams provide limited evidence of improving AI returns.
Fed uncertainty adds pressure to expensive technology stocks
The technology sell-off coincided with increasing expectations that the Federal Reserve could raise interest rates as early as this week.
Higher rates are particularly challenging for highly valued growth companies because they reduce the present value of expected future earnings and increase financing costs. They could also make heavily leveraged technology positions more difficult to maintain.
The combination of monetary-policy uncertainty and doubts about AI profitability created an unfavourable environment for semiconductor shares. Even investors who remain optimistic about long-term AI adoption have begun questioning whether current valuations adequately compensate for financial, competitive and execution risks.
The US market was positioned for a weaker opening, with Nvidia and Micron falling in premarket trading.
European stocks prove relatively resilient
European equities outperformed broader global markets as positive earnings from Unilever and Mercedes-Benz helped offset losses in technology shares.
The regional resilience reflects Europe’s lower concentration in highly valued AI stocks compared with US and Asian benchmarks. Consumer, industrial and financial companies carry greater index weight, providing some insulation from a semiconductor-led decline.
However, ASML’s sharp fall demonstrated that Europe is not detached from the AI repricing. The company is one of the region’s most valuable technology groups and occupies a critical position in the global semiconductor supply chain.
The MSCI All Country World Index declined 0.5% to its lowest level since June 29, confirming that the sell-off had extended beyond a single Asian market.
What investors should watch next
The immediate test will be whether the decline remains concentrated in semiconductor shares or spreads into the hyperscalers, financial institutions and infrastructure companies funding the AI expansion.
Earnings guidance from major US technology groups will be particularly important. Investors will be looking for measurable AI revenue, capital-spending discipline and evidence that new data-centre commitments can produce acceptable returns.
Developments surrounding China’s lithography equipment also require careful interpretation. The machinery reportedly remains behind ASML’s leading systems, but credible domestic production could have meaningful long-term implications for equipment suppliers and global export-control policy.
In South Korea, margin calls and leveraged selling could continue intensifying volatility even if the fundamental outlook for memory demand remains positive. A circuit breaker can slow a decline, but it does not remove the underlying need for investors to reduce exposure.
The semiconductor sector’s long-term growth story remains intact, but Tuesday’s rout shows that markets are no longer prepared to treat every increase in AI spending as automatically value-creating.
