China chip breakthrough triggers global tech rout
Global tech stocks plunged after China achieved a breakthrough in developing machinery crucial to the AI boom.
Trading was briefly halted on South Korea’s benchmark Kospi index, which collapsed more than 10pc overnight in a worldwide sell-off of semiconductor companies.
The downturn was triggered by reports that China has begun mass production of machinery critical to the manufacture of advanced microchips.
China’s Shanghai Yuliangsheng began production of so-called deep ultraviolet lithography tools crucial in the process of making semiconductors, according to The Information.
Until now, this technology had been dominated by Western chip giants.
Shares in ASML, Europe’s most valuable company and a leading manufacturer of the technology, fell more than 8pc on Monday.
Japan’s Nikkei and Taiwan’s Taiex stock markets both declined more than 4pc over fears the breakthrough could undercut companies in the AI supply chain.
South Korea’s chipmakers Samsung and SK Hynix, which have powered its huge rally this year, each plunged more than 12pc.
The two companies have fallen almost 50pc since hitting all-time highs last month, while the Kospi is down more than 30pc.
Stephen Innes of SPI Asset Management said the downturn was not a sign that demand for semiconductors has collapsed or that tech giants would abandon their investments in AI infrastructure.
He said: “What has changed is the market’s willingness to capitalise those promises at almost any price.
“The AI trade spent the past several years behaving like a flywheel: rising equity values encouraged more spending, more spending validated higher earnings expectations, and those expectations pushed valuations higher again.
“Now that same wheel is beginning to throw investors off at speed.”
Tuesday’s hammering followed a bleak day on Wall Street.
Nvidia plunged 5pc, wiping $250bn (£188bn) off the valuation of the world’s largest listed company in a single day. Rivals Sandisk tanked 11pc and AMD also fell 5pc.