Key insights
- Global chip stocks are declining due to a KOSPI selloff driven by Samsung's labor strike and SK Hynix's plunge. UBS warns that AI-linked semiconductor stocks are becoming crowded trades amid broader economic uncertainty, potentially signaling a correction in US equities.
Investing.com -- Global semiconductor stocks fell Friday, dragged lower by a sharp selloff in South Korean equities and mounting geopolitical uncertainty as U.S.-Iran talks showed no signs of progress.
Micron fell nearly 5% by 10:44 ET, while Nvidia dropped 3.5% and Broadcom shed 3%. AMD and Intel saw steeper declines of 3.7% and 6% respectively, with Dutch chipmaker ASML also falling 4.5%.
The moves tracked a broad selloff in Asia, where South Korea’s KOSPI sank more than 6%, pulling back from a record high above 8,000. Samsung Electronics and SK Hynix, the two largest stocks in the KOSPI index by market cap, fell sharply.
Samsung Electronics sank 8.6% after its labour union reaffirmed plans for an 18-day strike beginning May 21, rattling sentiment across the global chip supply chain. SK Hynix plunged 7.7%. The two stocks together account for a record 42.2% of the KOSPI, according to Manulife Investment Management.
Elsewhere, shares in European semiconductor companies also pulled back, with ASML, ASM International, and BE Semiconductor retreating by 4.6%, 4.2%, and 2.7%, respectively.
A new report from UBS has also raised concerns that the booming artificial intelligence trade may be entering overheated territory, despite record profitability and investor enthusiasm surrounding major AI-linked companies.
In its latest “HOLT Global Viewpoint” report, UBS analysts said AI stocks — especially semiconductor firms — have become the dominant force behind recent market gains, even as broader economic uncertainty tied to inflation and geopolitical tensions continues to rise.
The bank noted that the recent rally in U.S. equities represents an unusually extreme move by historical standards. UBS described April’s rise in U.S. share prices as a “2.8 standard deviation event” over the past 25 years, while investor positioning data shows mega-cap technology stocks are now heavily crowded trades. UBS also pointed to the growing dominance of Asian semiconductor companies. TSMC and Samsung have both surpassed the $1 trillion market capitalization mark, while AI-related firms outside the U.S. are projected to achieve record profitability levels by 2027.
Investors were also watching the second day of summit talks between U.S. President Donald Trump and Chinese President Xi Jinping in Beijing. The two leaders agreed on the need to keep the Strait of Hormuz open, a shipping lane that Iran effectively shut down following U.S.-Israeli strikes that began on February 28, causing significant disruption to global energy supplies.
UBS noted that developed-market semiconductor companies are expected to generate record cash-flow returns this year, with Nvidia forecast to reach an extraordinary 82% CFROI, however, it cautioned that such profitability has historically been extremely difficult to sustain. The report noted that only 0.02% of global companies have maintained CFROIs above 50% for a decade.
Trump said Thursday his patience with Iran was running out, after discussing the conflict with Xi and after Iranian personnel were reported to have seized a ship off the United Arab Emirates.
The U.S. paused its strikes on Iran last month but has since imposed a blockade on the country’s ports. Negotiations aimed at ending the conflict have stalled, with Iran refusing to abandon its nuclear program or give up its stockpile of enriched uranium.
Vahid Karaahmetovic contributed reporting