Semiconductors and secondary batteries plunge amid worries over AI capital expenditures
Foreigners and institutions offload shares in tandem, erasing the prior session's rebound in a single day
Key Market Trends
① Fears over AI financing resurface; Taiwan market drops over 3%
The domestic stock market suffered a steep decline as concerns regarding AI capital expenditures and funding resurfaced. Selling pressure concentrated heavily across Asian technology shares, with Taiwan's market tumbling more than 3% alongside South Korea.
A succession of corporate bond issuances by major tech firms, including Oracle, Meta, and Alphabet, served as a market headwind. As the intervals between funding rounds for AI investment shorten, worries persist that high interest rates could amplify debt-servicing burdens.
Anthropic's earnings and investment commitments further heightened caution. While revenues surged significantly, its operating profit swung back into the red, and AI-related purchase commitments reached approximately $900 billion. Of that total, $447.5 billion is committed through 2030.
The prospect that additional funding may be required to fulfill massive investment commitments amid ongoing operating losses weighed on market sentiment. Speculation also arose that investors might pressure AI companies to curb spending.
② Semiconductors and secondary batteries tumble, shrugging off falling oil prices and yields
Despite declines in international crude oil prices and U.S. Treasury yields, the domestic stock market showed virtually no reaction, with attention concentrated heavily on AI capital expenditures and uncertainties surrounding the midterm elections.
Semiconductor and secondary battery stocks slumped sharply, while telecommunications equipment, semiconductor materials, parts, and equipment, and oil refining shares also weakened. Conversely, airline, shipbuilding, and select pharmaceutical stocks posted selective gains.
Foreign investors were net sellers across nearly all sectors on the main KOSPI board. On the KOSDAQ, buying interest was muted outside of the entertainment and culture sectors.
Institutional investors similarly limited net purchases to a handful of sectors such as pharmaceuticals, transportation and warehousing, and food and beverages, while offloading most others. On the KOSDAQ, institutions were net sellers across the vast majority of sectors, excluding chemicals.
③ Cautious sidelining ahead of elections; shifting from 'all-in AI' to selective plays
Caution mounted ahead of the U.S. midterm elections as investors moved to ascertain the outcome. Expectations that election results could impact data center-related policies dampened market sentiment.
Apprehensions that escalating AI investments could diminish companies' capacity for shareholder returns, such as dividends and share buybacks, are also weighing on U.S. tech stocks. As AI—once lauded as the most definitive growth driver—falters, the domestic stock market appears to be reverting to its previous trading range.
Supply, Demand, and Sectors
Institutional buying support, which fueled the previous day's rebound, faded in a single day. With foreign investors net-selling across most sectors, the market lacked a strong catalyst to defend the indices.
In particular, heavy selling concentrated on index heavyweights such as semiconductors and secondary batteries, amplifying the decline felt by investors. On the other hand, gains in airline, shipbuilding, and select pharmaceutical shares indicated that rather than a broad-based market collapse, selective buying across specific industries and stocks persisted.
Because institutional and pension fund buying supported the floors for Samsung Electronics and SK hynix in the previous session, whether institutional capital flows back into these large-cap stocks will be critical for any future rebound.
Market Perspective
The issues surrounding AI capital expenditures and financing are not new headwinds. They have been raised repeatedly since last year, and recent earnings releases and corporate bond issuances have caused the market to react sensitively once again.
What has changed is that the market is shifting from one where all AI-related stocks rose in tandem to one that scrutinizes earnings and financial resilience. Rather than a total evaporation of faith in AI growth, the market is undergoing a process of sifting out companies capable of generating actual profits while bearing heavy investment costs.
Today, oil prices and bond yields fell simultaneously, yet the market barely reflected this dynamic. This underscores how deeply investor sentiment has contracted; conversely, should AI-related anxieties ease, the decline in oil prices and yields could potentially re-emerge as a positive tailwind.
It is premature to declare that the market has hit rock bottom. However, as the recent correction deepens, a growing number of stocks are falling regardless of their fundamentals. Amid ongoing volatility, investors need to simultaneously evaluate pricing and supply-demand dynamics, focusing on established market leaders, stocks with verified earnings, and counters that have accumulated institutional buying.
Source: Market Analyst's Stock Story (t.me/shmstory)
YouTube: Market Analyst TV www.youtube.com/@blueoak1004
This article has been reorganized from a Telegram post by "Market Analyst's Stock Story" with the author's consent. All content may contain errors and does not constitute a recommendation to buy or sell, nor should it be used as a basis for investment decisions. The contents of this post cannot be used as legal grounds under any circumstances.
