Global Chip Stocks Plunge After 160% Surge, Raising Questions on Market Outlook

After a remarkable surge of over 160% within less than a year, the Wall Street semiconductor index SOXX has lost a quarter of its value in just six weeks, dragging down major global stock indices. The South Korean market has been particularly affected, with the KOSPI index plunging 6% on Wednesday following an 11% drop the previous day and nearly 6% on the prior Friday. This sharp decline is largely due to the heavy weighting of two chipmakers, Samsung and SK Hynix, which together represent about 55%-60% of South Korea's market capitalization. SK Hynix fell 12% and Samsung 8% on Wednesday, with SK Hynix losing over half its value and Samsung more than 40% since their peak last month.

Analysts attribute the selloff to a combination of concerns including increased Chinese competition, a slowdown in AI infrastructure investments, and geopolitical tensions that have driven up oil prices. The massive debut of Chinese memory chipmaker CXMT, which soared 466% on its first day on the Shanghai Stock Exchange to a valuation near $500 billion, has also heightened fears of Chinese disruption in the chip industry. Despite CXMT’s success, experts note that the company still lags in key technologies and cannot meet current chip demand.

Senior analysts from Oppenheimer, Migdal Insurance, and Menora Mivtachim emphasize that the current downturn reflects profit-taking and rotation rather than a fundamental shift. They highlight ongoing strong demand for chips and AI infrastructure, with the market expected to recover as supply constraints persist and technological gaps remain. Regulatory uncertainties in the U.S., particularly regarding the use of cheaper Chinese memory chips, add to market volatility.

In Israel, chip companies Tower Semiconductor, Nova, and Camtek have mirrored global sector fluctuations, with Tower recently becoming the largest Israeli company on the Tel Aviv Stock Exchange before losing a quarter of its value. Overall, experts view the recent correction as a natural and healthy adjustment after a period of extraordinary gains, presenting potential buying opportunities at more attractive valuations.