It was one of those days where bad news just kept coming.
Semiconductor stocks took a beating from South Korea to Silicon Valley on Tuesday. The selling started in Asia, spread to Europe, and rolled into the U.S. session. By the time markets closed, some of the biggest names in chips had lost double-digit percentages.
South Korea was ground zero. Other AI-focused firms also experienced steep declines: Samsung SDI tumbled 11.37%, LG Innotek dropped 16.29%, Seoul Semiconductor declined 8.78%, and LG Chem lost 7.5%. In Japan, Tokyo Electron dropped 10.96%, Advantest slid over 10%, and memory maker Kioxia plunged more than 18%.
The damage was not limited to Asia.
Europe's chip equipment makers also got caught. ASML had already fallen more than 8% on Monday, and ASM International and BE Semiconductor each dropped between 2% and 3% in early trading Tuesday.
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Investors were dealing with a few different worries at once, and they all hit around the same time.
A key catalyst was news that a Chinese firm has built an immersion deep ultraviolet lithography machine, a domain where ASML leads. That kind of advanced gear threatens ASML's business and the entire global chip supply chain.
At the same time, broker reports started warning around memory price peaks in 2027. Standard Chartered's equities chief investment officer, Sundeep Gantori, noted that those reports align closely with his own forecast - the bank projects memory prices will reach their peak next year.
Additionally, the sell-off mirrors a wider decline in investor sentiment following recent media coverage of China's advances in memory chips and lithography equipment, Gantori added.
Owen Lamont, a senior vice president at Acadian Asset Management, contended that leveraged exchange-traded products might be amplifying market volatility, even if they aren't the only cause of recent moves. He highlighted the whole ecosystem of leveraged ETFs across Korea, Hong Kong, and the United States as a potential factor amplifying market moves.
"Right now we're facing an incredible uncertainty," Lamont told CNBC. "No one has any idea how this AI process is going to affect our economy, and so I think it's going to be rocky no matter what."
The long-term outlook remains intact, according to Gantori. "The market opportunity remains sufficiently large for multiple players to benefit and coexist," he said, with the ongoing AI investment cycle propping up leading technology companies.
He also said something worth paying attention to: "What matters is risk-reward and at current valuations, risk-reward has improved."
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