Asian Chip Stocks Tumble, Dragging Tel Aviv Market Lower
Translated & summarized from Bizportal by baba
The Tel Aviv Stock Exchange is expected to open lower due to sharp declines in Asian semiconductor stocks, driven by fears of Chinese competition and concerns over AI investment profitability. Major Asian chipmakers saw significant drops, impacting Israeli companies like Tower, Nova, and Camtek, which are facing negative arbitrage gaps. Other Israeli tech firms, including Nice and Palo Alto, are also anticipated to open lower, while Teva and Ormat show slight positive gaps. The market's performance on Tuesday was mixed, with real estate stocks rising and technology stocks falling.
The story in 6 lines · by baba
- Tel Aviv Stock Exchange futures indicate a lower opening following sharp drops in Asian semiconductor stocks.
- Concerns over Chinese competition in memory chips and AI investment profitability are impacting the sector.
- Major Asian chipmakers like Samsung, SK Hynix, Kioxia, and TSMC experienced significant stock declines.
- Israeli companies Tower, Nova, and Camtek are expected to open with negative arbitrage gaps.
- Other Israeli tech firms, including Nice and Palo Alto, also face anticipated declines.
- Broadcom CEO Hawk Tan warned about the high expectations and costs associated with AI investments.
The Tel Aviv Stock Exchange is set to open with significant declines, mirroring sharp drops in Asian semiconductor stocks and following weakness on Wall Street. Concerns over Chinese competition in the memory chip market, coupled with questions about the profitability of AI infrastructure investments, are weighing on the sector. South Korea's Kospi index fell approximately 7%, with Samsung down about 8% and SK Hynix down nearly 9%. In Japan, memory chip maker Kioxia plunged over 12%, and Taiwan's TSMC weakened by about 2%.
This pressure is extending to the Israeli market. Tower Semiconductor lost about 6% on Tuesday, while Nova and Camtek fell 4% and 0.8% respectively, despite relative stability in the main indices. On Wednesday morning, Nova and Camtek are expected to open with negative arbitrage gaps of around 1% each, and Tower with a more moderate gap of about 0.1%. This suggests some of the sector's weakness was already priced in, but further pressure is anticipated for Nova and Camtek.
Beyond the chip sector, other Israeli tech companies are also facing headwinds. Nice is expected to open down about 1.5%, Palo Alto down about 1.3%, and Elbit Systems down about 0.5%. Conversely, Teva is showing a positive gap of about 0.2%, and Ormat of about 0.7%.
The primary concern is Chinese competitor CXMT's technological advancements in memory chips, which could impact pricing and profitability for established manufacturers. While CXMT plans to launch a server product by year-end, questions remain about its ability to achieve mass production, quality, and cost-competitiveness. The advanced HBM memory chips used in AI systems present higher entry barriers.
Adding to the market's concerns, Broadcom CEO Hawk Tan warned about the high expectations for AI investments, highlighting the gap between model developers' revenue growth and their massive spending on training and computing. This raises questions about the sustainability of chip suppliers' growth if clients struggle to fund further expansion.
On Tuesday, the Tel Aviv Stock Exchange closed with minor gains. The TA-35 and TA-125 indices were flat, while the TA-90 rose about 0.2%. Real estate indices performed well, with the construction index up 1.9% and the real estate index up 1.6%. The technology index fell 0.5% and insurance lost 0.7%. Trading volume was approximately NIS 3.9 billion. Notable stock movements included Electra Real Estate surging 14.2%, Teva rising 5%, and Gix jumping 100% on news of expanding robot operations at Shiba Hospital. Conversely, Bazan fell 7.3% and Petrochemical Industries lost 10.1% following a benzene anomaly incident.
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