Semiconductor and technology stocks in Asia declined again on Wednesday. This pullback followed overnight losses on Wall Street and was driven by concerns over high valuations of AI-related companies.
In Japan, SoftBank Group shares dropped 10%. Reports indicated that the company's attempt to secure a loan of at least $6 billion using its stake in OpenAI as collateral has stalled. SoftBank is exploring alternative financing options and may revisit the same loan later if necessary.
Japanese chip equipment manufacturers also faced selling pressure. Advantest shares fell 3.8%, while Renesas Electronics shares declined 3.4%.
Sharp Declines in South Korea and Taiwan
In South Korea, memory chip giant SK Hynix fell more than 8%, and Samsung Electronics shares dropped 7.45%. Battery maker Samsung SDI lost over 5%, and display panel producer LG Display declined about 9%.
In Taiwan, the chip sector was also under pressure. Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, fell about 2%, while Apple supplier Hon Hai Precision Industry lost more than 4%.
The weak performance in Asia mirrored the previous session on Wall Street. The tech-heavy Nasdaq Composite fell 0.97%, and the S&P 500 dropped 0.26%. A brief recovery in semiconductor stocks the day before faded as the iShares Semiconductor ETF declined 1%.
Fund Flows May Shift Away from Current Tech Stocks
Market observers suggest that AI-focused funding rounds could divert money away from existing technology stocks. Upcoming IPOs from SpaceX, Anthropic, and OpenAI may reduce investor appetite for previously listed tech companies.
OpenAI's confidential IPO filing on Monday has heightened interest in AI investments. SpaceX is expected to begin trading on Friday. This IPO could reach record levels due to its anticipated size, though some investors view the $1.75 trillion valuation as a sign of overheating in the sector.
Investors May Turn to Defense Stocks
Andrew Jackson, an equity strategist at Ortus Advisors, said volatility in tech stocks might steer investors toward defense companies. He noted that Japan's government increasing focus on military preparedness could strengthen this trend.
Jackson also mentioned that companies like Mitsubishi Heavy Industries, Kawasaki Heavy Industries, IHI Corp., and Japan Steel Works could attract renewed interest following recent pullbacks.
