Asian semiconductor shares tumbled Tuesday, July 28, 2026, as investors sold off major chipmakers amid concerns over artificial intelligence (AI) infrastructure financing, lofty valuations, and intensifying competition from China. South Korea led the regional decline, with CNBC plunging more than 13% and CNBC falling over 12%.
Regional Market Impact
The sell-off extended a rout in chipmakers following a weak session for U.S. semiconductor stocks on Monday, during which the VanEck Semiconductor ETF (SMH) lost more than 2%. In South Korea, other AI-linked companies also saw heavy losses: LG Innotek slid nearly 18%, Samsung SDI dropped over 10%, Seoul Semiconductor fell about 7%, and LG Chem lost more than 6%.
Japanese and Taiwanese markets mirrored this trend. Japan’s Kioxia plunged more than 18%, Tokyo Electron dropped almost 11%, and Advantest slid over 10%. SoftBank Group, which holds a stake in Arm as an AI investment proxy, fell 6.3%. In Taiwan, TSMC was down 2.9% and MediaTek fell more than 9% in morning trade. Mainland China’s tech-heavy ChiNext 300 index declined 4.7%, while the Hang Seng China Semiconductor Chips Index dropped 5%.
Drivers of the Semiconductor Sell-off
Analysts attribute the volatility to a combination of geopolitical and financial pressures. According to Sundeep Gantori, chief investment officer for equities at Standard Chartered, sentiment deteriorated following media reports regarding China’s ambitions in lithography equipment and memory chips. Han Ji-young, an analyst at Kiwoom Securities, noted that reports of Chinese companies developing domestic deep ultraviolet (DUV) lithography equipment reignited fears that Chinese memory-chip makers could accelerate capacity expansion.
Financial concerns regarding the AI “trade” also weighed on the market. A Wall Street Journal report suggested Reuters could provide a $250 billion financial backstop for an OpenAI data-center project, leading investors to question if the chip leader is financing its own customers. This report contributed to Nvidia shares falling nearly 5%.
Additionally, Gantori cited broker reports suggesting a memory price peak in 2027 as a factor in the Korean market’s weakness, though Standard Chartered expects the peak to occur next year.
AI Investment Uncertainty and Volatility
The sensitivity of Samsung and SK Hynix is linked to their roles as among the world’s largest suppliers of high-bandwidth memory (HBM) chips used in AI servers. Owen Lamont, senior vice president at Acadian Asset Management, told CNBC that the swings underscore uncertainty regarding the AI investment cycle and how the technology will affect the economy.
Lamont also suggested that leveraged exchange-traded products in the U.S., Hong Kong, and Korea may be magnifying these market fluctuations. Meanwhile, Han Ji-young noted that investors were increasingly cautious ahead of upcoming earnings reports, observing that semiconductor shares had experienced sharp declines even after stronger-than-expected earnings from Alphabet and Samsung Electronics.
Broader Asian Capital Outflows
The recent volatility follows a period of massive capital exodus from the region. Foreign investors pulled a net $137.36 billion from equities across Taiwan, South Korea, India, Indonesia, Thailand, Vietnam, and the Philippines in the first half of 2026, the fastest six-month outflow since 2010, according to LSEG data. South Korea and Taiwan were the most affected, shedding $70.8 billion and $29.6 billion, respectively.
According to Joshua Crabb, head of Asia-Pacific equities at Robeco, this trend was driven by investors trimming their biggest winners—including TSMC, Samsung, and SK Hynix—to rebalance portfolios and reduce concentration risks after the KOSPI nearly doubled in the first half of the year.
Summary of Tuesday’s Major Stock Declines
- Kioxia: More than 18%
- LG Innotek: Nearly 18%
- SK Hynix: More than 13% (up to 14%)
- Samsung Electronics: Over 12% (up to 13.4%)
- Tokyo Electron: Almost 11%
- Advantest: Over 10%
- Samsung SDI: Over 10%
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