San Disk, Micron, and Hynix all suffered heavy losses! Korean stocks plummeted. When will the "down cycle" end?
[SanDisk, Micron, and Hynix all suffered heavy losses! Korean stocks plummeted. When will the "down cycle" end? 】Korean stocks fell, stocks fell, and technology stocks fell into a "down cycle"! The 60-day correlation between South Korea's KOSPI index and the Nasdaq 100 recently climbed to its highest level since 2021, according to data provided by Rayliant. In this regard, some analysts have warned that this closer relationship will bring risks.
Korean stocks fell, stocks fell, and technology stocks fell into a "down cycle"! On Tuesday evening, Beijing time, the three major U.S. stock indexes diverged. As of 22:00, the Dow rose 0.61%, the S&P 500 fell 0.35%, and the Nasdaq fell 1.32%. In addition, the Nasdaq 100 index, which is dominated by technology stocks, fell by more than 1.8%, and the Philadelphia Semiconductor Index fell by more than 5%. Memory chip concept stocks continued to plummet, with Micron Technology falling by more than 10%, SanDisk falling by more than 12%, and SK Hynix ADR falling by more than 9%. Earlier in the day, on the South Korean securities market, investors sharply sold technology stocks such as SK Hynix and Samsung Electronics due to deepening doubts about the prospects of large-scale investment in artificial intelligence infrastructure. In addition, leading optical communications stock Corning fell nearly 20% during the session, and the company's third-quarter performance guidance was lower than market expectations. In addition, Lumentum fell more than 12%. The 60-day correlation between South Korea's KOSPI index and the Nasdaq 100 recently climbed to its highest level since 2021, according to data provided by Rayliant. In this regard, some analysts have warned that this closer relationship will bring risks. Memory chip concept stocks continue to fall On Tuesday (July 28), South Korea's two major memory chip giants, SK Hynix and Samsung Electronics, both fell by more than 13%, dragging the KOSPI index down by more than 10%. That night, U.S. chip stocks continued to plummet. As of 22:00, the Philadelphia Semiconductor Index fell 5.6%. Memory chip concept stocks collectively fell sharply, with Micron Technology falling 10.12%, SanDisk, Western Digital, and Seagate Technology falling more than 12%, and SK Hynix ADR falling 9.72%. Other chip stocks also adjusted collectively, AMD fell by more than 8%, ARM fell by more than 9%, Intel fell by more than 7%, ASML fell by more than 5%, Qualcomm fell by more than 3%, and Nvidia fell by 1.50%. Optical communication concept stocks continued to adjust, with Corning falling 19.62%, Lumentum falling 12.53%, Marvell Technology falling more than 9%, and Credo Technology falling nearly 10%. Corning's financial report released that day showed that the company's second-quarter core sales were US$4.74 billion, a year-on-year increase of 17%; of which, optical communications business sales increased by 32% to US$2.07 billion; the company's second-quarter adjusted earnings per share were US$0.78, a year-on-year increase of 30%. However, Corning expects core sales in the third quarter to be US$4.9 billion to US$5 billion, compared with market expectations of US$5 billion. The upper limit of the guidance is only in line with expectations, and the midpoint is slightly lower than expected. According to Bloomberg, Hebe Chen, senior market analyst at Vantage Global Prime, said: "Investors are clearly not ready to let go of their concerns about the AI sector. The latest sell-off by chip manufacturers shows that market doubts about spending, returns and valuation are still deepening, not receding." The decline in memory chip and computing hardware stocks is related to Nvidia’s latest actions. Recently, foreign media reported that Nvidia is advancing a new round of AI infrastructure transactions with a potential total scale of more than US$750 billion, accelerating the pace of investment that a series of skeptics have warned may artificially drive up industry demand and valuations. NVIDIA announced on Friday night that it has established a strategic partnership with South Korea's SK Group, and the two parties will conduct business transactions of more than 500 billion US dollars. At the same time, Nvidia is also negotiating to provide up to $250 billion in financing guarantees to help OpenAI lease computing power for a U.S. data center project, which will become one of the largest financing transactions between the chipmaker and its customers. Prominent figures such as Goldman Sachs Group Inc. and Michael Berry, the investor behind the movie "The Big Short," have warned for months about the "circular" nature of such agreements -- Nvidia provides money and takes stakes in companies and projects that use its chips, with the money ultimately flowing back into its own business. Despite this, the pace of trading is accelerating. Market concerns are that if AI fails to bring profits to investors who have invested hundreds of billions of dollars, such transactions may distort demand, promote wrong decisions and magnify losses. Bloomberg Intelligence analyst Mandeep Singh said: "Nvidia wants to ensure that the pace of construction maintains the current pace, which is a significant risk for Nvidia. If the situation is paused, even for only 6 months, it will be extremely detrimental to it."
Such transactions by Nvidia have made many AI companies increasingly interconnected, making the industry more vulnerable to systemic shocks. One of the core concerns also includes rising industry debt levels - many AI companies are increasing their borrowing efforts to finance data center and chip projects. The linkage between U.S. and South Korean technology stocks has increased Wall Street tech stocks are increasingly linked to South Korea's stock market as spending on artificial intelligence ties the fortunes of U.S. tech giants to those of South Korean memory chip makers. According to CNBC citing Rayliant data, the 60-day correlation between South Korea's KOSPI index and the Nasdaq 100 index has recently climbed to about 0.50, the highest level since 2021. This growing relationship reflects the dominance of Samsung Electronics and SK Hynix in the KOSPI - the two companies together account for more than half of the index's weight. They are all at the core of the AI hardware supply chain, providing storage chips for data centers operated by U.S. technology giants. "The correlation has increased because KOSPI has become a semiconductor index," Futurum Group analyst Rolf Bulk said. Samsung and SK Hynix are increasingly reliant on the same capital spending as hyperscalers that drive earnings at U.S. semiconductor and technology companies. Bulk pointed out that data center demand has accounted for more than half of global DRAM (dynamic random access memory) demand from about 40% last year to more than half this year, and is expected to expand further. DRAM is a key component in AI servers. This linkage allows Asian investors to sense the strength of global AI trading sentiment in advance before Wall Street opens. According to CNBC, Jung In Yun, founder of Fibonacci Asset Management, said: "Samsung and SK Hynix provided the first liquidity market reflection of overnight events affecting global AI demand. SK Hynix has become an important benchmark in particular because of its high-bandwidth memory chip business - one of the most critical components in the AI supply chain." According to CNBC, Phillip Wool, director of research at Rayliant Global Advisors, said: "The trends in U.S. and Korean technology stocks are increasingly driven by common fundamental factors, namely sentiment towards AI hardware trading." When AI-related news comes out during the U.S. closing period, Samsung and SK Hynix can serve as "proxy" indicators for investors' reaction to Wall Street's reopening; conversely, when news appears during the U.S. stock trading session, Nasdaq also provides forward guidance for Korean stocks on the next trading day. This close linkage also contains risks. Rising correlations undermine the diversification benefits that investors have traditionally sought by holding both U.S. and Korean stocks. Bulk said: "South Korea no longer provides diversification against U.S. technology stocks. When half of the index is linked to the same cyclical theme, the slowdown in capital expenditures of very large enterprises will have a greater impact on the Korean market than most other markets." He added that the endogenous volatility of Korean memory chip stocks is also higher than that of many U.S. chip manufacturers, and leveraged ETF flows have further amplified volatility. Wool also pointed out that the AI theme has now become a joint leading force in the trend of US and South Korean technology stocks. Investors originally expected to diversify regional risks by holding these two markets at the same time, but this advantage is disappearing. He explained: “When all markets are driven by the same big risk factor, the original purpose of diversifying risks by investing in different countries will not be achieved.”
Such transactions by Nvidia have made many AI companies increasingly interconnected, making the industry more vulnerable to systemic shocks. One of the core concerns also includes rising industry debt levels - many AI companies are increasing their borrowing efforts to finance data center and chip projects. The linkage between U.S. and South Korean technology stocks has increased Wall Street tech stocks are increasingly linked to South Korea's stock market as spending on artificial intelligence ties the fortunes of U.S. tech giants to those of South Korean memory chip makers. According to CNBC citing Rayliant data, the 60-day correlation between South Korea's KOSPI index and the Nasdaq 100 index has recently climbed to about 0.50, the highest level since 2021. This growing relationship reflects the dominance of Samsung Electronics and SK Hynix in the KOSPI - the two companies together account for more than half of the index's weight. They are all at the core of the AI hardware supply chain, providing storage chips for data centers operated by U.S. technology giants. "The correlation has increased because KOSPI has become a semiconductor index," Futurum Group analyst Rolf Bulk said. Samsung and SK Hynix are increasingly reliant on the same capital spending as hyperscalers that drive earnings at U.S. semiconductor and technology companies. Bulk pointed out that data center demand has accounted for more than half of global DRAM (dynamic random access memory) demand from about 40% last year to more than half this year, and is expected to expand further. DRAM is a key component in AI servers. This linkage allows Asian investors to sense the strength of global AI trading sentiment in advance before Wall Street opens. According to CNBC, Jung In Yun, founder of Fibonacci Asset Management, said: "Samsung and SK Hynix provided the first liquidity market reflection of overnight events affecting global AI demand. SK Hynix has become an important benchmark in particular because of its high-bandwidth memory chip business - one of the most critical components in the AI supply chain." According to CNBC, Phillip Wool, director of research at Rayliant Global Advisors, said: "The trends in U.S. and Korean technology stocks are increasingly driven by common fundamental factors, namely sentiment towards AI hardware trading." When AI-related news comes out during the U.S. closing period, Samsung and SK Hynix can serve as "proxy" indicators for investors' reaction to Wall Street's reopening; conversely, when news appears during the U.S. stock trading session, Nasdaq also provides forward guidance for Korean stocks on the next trading day. This close linkage also contains risks. Rising correlations undermine the diversification benefits that investors have traditionally sought by holding both U.S. and Korean stocks. Bulk said: "South Korea no longer provides diversification against U.S. technology stocks. When half of the index is linked to the same cyclical theme, the slowdown in capital expenditures of very large enterprises will have a greater impact on the Korean market than most other markets." He added that the endogenous volatility of Korean memory chip stocks is also higher than that of many U.S. chip manufacturers, and leveraged ETF flows have further amplified volatility. Wool also pointed out that the AI theme has now become a joint leading force in the trend of US and South Korean technology stocks. Investors originally expected to diversify regional risks by holding these two markets at the same time, but this advantage is disappearing. He explained: “When all markets are driven by the same big risk factor, the original purpose of diversifying risks by investing in different countries will not be achieved.”