Chip stocks slide on AI oversupply fears

Semiconductor shares in Japan and South Korea declined sharply after a broad selloff in U.S. technology stocks. The weakness in Asia followed a drop of about 6.3% in the Philadelphia Semiconductor Index, signaling a significant pullback across major U.S. chip names. The downturn in American trading set the tone for risk sentiment in the following Asian session, with investors reacting to both price moves and shifting expectations around demand for AI-related hardware.

Within the U.S. market, memory-focused companies were among the hardest hit. Micron Technology (MU) and SanDisk (SNDK) each fell more than 10%, underscoring the pressure on firms closely tied to data storage and high-performance computing. The sharp overnight declines in these companies contributed to increased caution among investors in similar stocks listed in Asia.

Reports that Meta Platforms (META) plans to sell access to its AI computing power added a new source of concern for semiconductor and AI infrastructure investors. The move would make Meta’s (META) excess AI capacity available to outside customers, effectively positioning the company as a seller of computing resources. This development led market participants to question whether the supply of AI compute might grow faster than demand, particularly in areas reliant on high-end chips and memory.

Fears of a potential oversupply of AI-related capacity intensified the existing pressure on hardware and memory suppliers. Multiple AI infrastructure and memory-chip vendors sold off following the Meta reports, indicating that investors were reassessing the earnings outlook for companies that have benefited from recent enthusiasm around AI-driven spending.

The selloff in semiconductor names was accompanied by pronounced volatility in South Korea’s equity derivatives. Steep early moves in KOSPI 200 futures triggered a safeguard mechanism at the Korea Exchange. In response, the exchange activated a sell-side sidecar, suspending program sell orders for five minutes to curb disorderly trading and limit short-term volatility.

The intervention highlighted the intensity of selling pressure in South Korean stocks linked to the technology and semiconductor sectors. While the halt was temporary, it underscored how quickly sentiment had shifted from optimism about AI and chips to caution about the pace and sustainability of that growth.

Japanese semiconductor-related shares also weakened in the wake of the U.S. rout and oversupply concerns. Kioxia, a major storage and memory supplier, saw its shares plunge around 10%. The decline in Kioxia weighed on Japanese equity indices and illustrated how sensitive storage and memory names have become to shifts in expectations for AI and data-center demand.

The slide in Kioxia added to the region-wide correction in chip and memory stocks. Together with the losses in South Korea and the earlier U.S. declines, the move suggested a coordinated reassessment of valuations across global semiconductor markets, centered on the balance between rapid AI investment and the risk of excess capacity.