SK Hynix reported a record quarterly operating profit that still fell short of analyst forecasts, and investors sold chipmakers across Asia in response. Seoul's Kospi fell as much as 13% before closing 6% lower, while Tokyo's Nikkei 225 ended down 1.5%. Korean regulators halted trading for a second consecutive day.
Investors kept dumping chipmaker stocks on Wednesday after disappointing results from SK Hynix, sending Asian markets lower amid fears about the AI boom's sustainability. Seoul's Kospi index dropped as much as 13% before ending down 6%, bringing its losses this week to 15%.
The world's second-largest memory-chip maker reported a 557% surge in operating profit to a record Won60.5tn ($42bn) in the three months to 30 June compared with the same period last year. That missed a forecast of Won64tn by LSEG SmartEstimate, while sales also fell short of estimates despite jumping 257% to Won79.3tn ($55bn).
Chipmakers lead the selling across Asia
SK Hynix shares plunged almost 20% before paring losses to close about 10%. Samsung Electronics, SK's larger rival, weakened 5.2%.
The selling spread beyond Seoul. Tokyo's Nikkei 225 ended 1.5% lower, taking its decline to more than 15% since its June peak. In Europe, ASML fell 1.2% before turning positive.
China's lithography push rattles investors
Song Zhe at BNP Paribas Asset Management told the Financial Times: "The semiconductor market has run too fast too far." Song said investors were further rattled by a Reuters report on Tuesday suggesting China would begin mass-producing its own deep ultraviolet (DUV) lithography machines needed for advanced chipmaking.
Kim Young-geon, an analyst at Mirae Asset Securities in Seoul, cut SK Hynix's target price and said investors were now concerned about China making lithography equipment. The earnings miss itself reflected SK Hynix's greater exposure to high-bandwidth memory chips used in AI hardware, leaving it less able to benefit from rising prices for conventional memory chips.
However, SK Hynix executives said the risk of memory oversupply from capacity expansion remained limited, arguing that supply would stay tight for a considerable period as customers continued to buy more chips.
Seoul halts trading as leveraged bets unwind
The Kospi has lost 41% of its market capitalization in 28 trading sessions. On Wednesday, regulators were obliged to enforce the circuit breaker, suspending all trading temporarily, for the second consecutive day and the tenth time this year.
This month alone, 360,000 retail accounts in Korea have been wiped out, and the market has recorded 1.2 million margin calls. South Korean regulators have set a minimum cash requirement to invest in single-stock leveraged exchange traded funds, which they have blamed for much of the volatility.
Korea's stock market has been nearly twice as volatile as Japan's this year, according to analysts at Eurasia Group, who noted that the Kospi had even surpassed bitcoin in terms of volatility.
Sources: Financial Times, MarketWatch
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