Markets wobbled this morning, as investors woke up to the Korean Kospi and Japanese Nikkei, which have led the AI trade this year, sliding 10% and 4%.
The sell-off seems to have been linked to the debut of the Chinese ChangXin Memory Technology (CXMT), a competitor to the memory manufacturers in Korea and emerging markets, according to analysts.
Susannah Streeter, chief investment strategist at the Wealth Club, noted CXMT is the fourth largest producer of DRAM, the fast-working memory used for AI accelerators and microprocessors.
“Investors had allocated significant chunks of portfolios to the South Korean chip makers and are rotating out to free up capital in expectation there will be more chip opportunities coming out of China and its ambitious AI strategy, with more expected to flow through the IPO pipeline.”
Samsung and SK Hynix, two of the poster children for the AI rally this year, were at one point down 12%, Streeter added. These stocks have dominated performance so far this year, with FTSE Korea up 76.4% year to date, primarily owing to these names.
“It’s a reminder just how volatile AI investments are right now, given how quickly tech is advancing and how the market share of mighty incumbents threatens to be gobbled up,” Streeter said.
Russ Mould, investment director at AJ Bell, added: “This raises the stakes so far as the results due from both Microsoft and Amazon on Wednesday and Thursday respectively, especially as investors do not seem to be warming to NVIDIA’s plan to help finance the construction of a large data centre by OpenAI in the US.
“Nvidia’s commitments keep adding up and, for some, bring back only bad memories of how broadband and telecom equipment companies came badly unstuck when they financed customer purchases at the turn of the century.”
Ben Barringer, head of technology research at Quilter Cheviot, said comparisons to previous bubbles are understandable.
“With tech stocks selling off again, it is pertinent to question whether once again we are in the ‘tech bubble 2.0’, and if things are beginning to go pop.”
Investors, he noted, were asking this question in October 2025, but the AI stocks were powering ahead and dragging the rest of the market with them.
“Things are different this time, with share prices coming under pressure, but certainly, at the headline level at least, little has actually changed.”
He noted that despite a tough July, technology stocks have still clearly outperformed wider markets over the long term. According to data from FE fundinfo, the MSCI World Information Technology index is up 29.1% over the past 12 months, compared with a 18.4% return from the wider MSCI World, despite recent underperformance
“However, scratch beneath the surface, and the AI narrative has moved on,” Barringer said.
The narrative has evolved, with it no longer being about the data centre capacities or the usual US hyperscalers alone, Barringer argued. Indeed, the magnificent seven has traded sideways this year, as research from IG earlier today indicated.
Instead, semiconductor equipment, memory chip producers and power chips have been in demand.
“Revenue growth, rocketing usage and a switch in leadership, all point to an AI trade that is maturing,” the Quilter head of research noted.
He was not the only investor to remain undeterred by the recent volatility. Kieron Poon, investment director of Asian equities at Aberdeen Investments, added they have remained broadly positive on the long-term view for Asian technology stocks.
“Our discussions with companies across Korea and Taiwan point to strong and sustained AI-related demand, with management teams generally confident of the medium-term outlook.
“Also, the recent market pullback has brought valuations to more attractive levels, creating opportunities for us to add exposure to high-quality businesses at more reasonable prices.”
The demand for these stocks remains high and may even continue to strengthen as AI usage becomes more sophisticated and complex, the Aberdeen director argued.
“We believe the recent market adjustment is a healthy one and can open a broader range of investment opportunities across Korea and the wider Asian technology sector, especially in companies with solid fundamentals and exposure to the structural growth of AI throughout the tech supply chain.”
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