The artificial intelligence trade is showing signs of strain in the very markets that powered its spectacular rise. South Korea’s Kospi index plunged 7.4% on Tuesday as semiconductor shares tumbled after Broadcom CEO Hock Tan warned that AI investors are behaving like casino gamblers. Indian IT stocks, which is seen as anti-AI trade, jumped on the news.
The Kospi fell to 5,914.35, its lowest level since late July, after having crossed 9,000 in June at the peak of the global AI boom. Samsung Electronics dropped 7.7%, while memory-chip maker SK Hynix plunged 8.8%. The sell-off was severe enough for the Korea Exchange to halt program sell orders for five minutes after the KOSPI 200 futures index fell 5.08%.
On Dalal Street, the reaction was markedly different. The Nifty IT index rose 3%, led by gains of as much as 5% in HCL Technologies and Tata Consultancy Services (TCS). The combined market capitalisation of IT stocks increased by Rs 26,000 crore, while the Sensex jumped more than 600 points and the Nifty gained nearly 1% as a result of the tech-led rally.
The immediate trigger for the Korean sell-off was renewed concern over the rise of China’s ChangXin Memory Technologies, or CXMT.
Reports said CXMT has made progress on a new memory architecture that is also being pursued by Samsung and SK Hynix. The Chinese company plans to roll out a new server-memory product by the end of 2026 that would enable higher storage density, according to a report by the South China Morning Post.
That has revived fears that Chinese semiconductor makers are narrowing the technology gap with global rivals. US memory chip maker Micron Technology also fell overnight following reports of rapid advances by CXMT.
The impact has been particularly sharp in South Korea because of the market’s heavy exposure to semiconductor companies. The Kospi has now fallen by a third from its record high in June and slipped below its 200-day moving average. Foreign investors have accelerated their exit, selling more than $6.3 billion worth of Kospi shares on a net basis in October.
"Samsung’s strong earnings have been overshadowed by concerns about future competition from CXMT and the sustainability of AI spending," said Jung In Yun, chief executive officer of Fibonacci Asset Management Global. "These concerns may weigh on sentiment, but CXMT still needs to translate technological progress into commercially competitive production at scale."
That qualification, however, has done little to calm investors. The market is pricing not only the possibility of stronger Chinese competition, but also the risk that the AI-driven semiconductor upcycle may not remain as powerful as expected.
Uncertainty over whether the upcycle can last into 2028 and beyond appears to be weighing on valuations and share prices of Korean chipmakers, said Ha SeokKeun, chief investment officer at Eugene Asset Management.
The semiconductor sell-off has coincided with a broader reassessment of the economics of the AI boom. Broadcom Chief Executive Officer Hock Tan warned that financing the AI buildout could become a bigger problem than chip shortages. His blunt comments added to investor anxiety at a time when higher interest rates are beginning to weigh on massive debt-funded deals and threatening once-hot initial public offerings.
"A lot of investors have no clue what they are investing in," Tan said at an event in Singapore. Investors, he added, "set very extreme expectations only to find out that it’s almost like they are in a casino."
Tan also questioned whether businesses were wasting money on AI initiatives and raised doubts about the longer-term economics of money-losing AI labs. While he acknowledged that OpenAI reaching annualised revenue of $50 billion in September pointed to the existence of a viable business model, he said that did not guarantee long-term profitability.
"For now it’s still losing money because they’re spending a lot on training," Tan said. "So frankly, it doesn’t tell anything at this point except that there is a lot of potential revenue growth out of providing frontier generative AI models."
His comments strike at the central assumption behind the semiconductor rally: that massive spending on advanced chips, data centres and model development will eventually translate into sustainable profits.
India’s IT stock rally does not necessarily signal a new AI boom in the country. Instead, it highlights a sharp contrast in how investors are treating different parts of the technology ecosystem.
South Korea’s market is directly exposed to memory chips, semiconductor pricing and the continuing scale of AI infrastructure spending. India’s IT sector, by comparison, is showing strength even as investors question whether the most aggressive assumptions around the AI buildout can hold.