Asian chip stocks slump as Nasdaq correction rattles AI trade

Asian semiconductor shares dropped heavily on Friday, following a steep decline in US technology stocks the night before, according to CNBC Technology. South Korea's SK Hynix lost more than 8% and Samsung Electronics gave up 7%.

The losses spread through Korea's tech sector, with LG Innotek down 10% and LG Display off 7.7%. The trigger was a rough Wall Street session in which the Nasdaq Composite fell 5.5%, ending the day over 10% beneath its latest high and entering correction territory. The Philadelphia Semiconductor Index dropped 12.2%.

Investors are questioning whether the huge sums being poured into AI infrastructure will pay off. They also fear that the Democrats' wide victory in the US midterm elections might bring stricter rules on building data centers, which could reduce demand for AI chips and the equipment that supports them.

Japan's chip-linked names suffered too. Advantest, which makes chip-testing equipment, sank 12.2%, Tokyo Electron lost 7.3% and SoftBank Group dropped 11.6%. Memory maker Kioxia Holdings was down almost 10% and Renesas Electronics slipped 7.5%.

Taiwan's market also took a hit. Contract chipmaker TSMC slid 9.6%. Hon Hai Precision Industry, which trades under the Foxconn name, fell 9.4%, while Foxconn Technology lost 9.1%.

Timothy Moe, who leads Asia Pacific equity strategy at Goldman Sachs, said on CNBC's Squawk Box Asia that the region's sell-off has been made worse by investors closing out positions, automatic stop-loss orders and choppy trading. He said political resistance to US data-center construction could hit demand and earnings for Asian suppliers of AI hardware.

Moe said any doubt about how quickly and how widely US buildout proceeds would call the whole outlook into question. He described the market as quick to react before examining the details, and said that is what is happening now.