Asian stocks plunged to their lowest level in more than two months on Tuesday as advances by Chinese chipmakers rattled investor confidence in the artificial intelligence boom, despite soaring global semiconductor sales.
Asian semiconductor shares led a sharp regional sell-off as investors questioned whether the AI boom could sustain record profits in the face of growing competition from China.
MSCI's broadest index of Asia-Pacific shares outside Japan fell more than 2 per cent to its lowest level since late July, Reuters reported.
South Korea's benchmark KOSPI slumped more than 6 per cent, its sharpest one-day decline since July. Japan's Nikkei shed 2.6 per cent, while Taiwan's stock market fell 2 per cent.
Memory-chip manufacturers were among the hardest hit. Samsung Electronics slumped 8 per cent, SK Hynix tumbled 10 per cent and Japan's Kioxia Holdings plunged 14 per cent. Taiwan Semiconductor Manufacturing Company (TSMC) fell 1.8 per cent.
The figures are based on intraday trading reported by Reuters on 13 October.
In China, the blue-chip CSI300 index slipped 0.6 per cent by the midday break, hitting its lowest level since August 2025. The Shanghai Composite shed 0.3 per cent to a three-month low, while shares in memory-chip manufacturer CXMT fell as much as 5.3 per cent despite reports of technological advances. Hong Kong's Hang Seng Tech Index lost1.5 per cent, according to Reuters.
The widespread losses exposed a growing disconnect between booming semiconductor sales and fears over the industry's future profitability.
The sell-off followed reports of technological advances by Chinese memory-chip manufacturer ChangXin Memory Technologies (CXMT), fueling fears that tougher competition could threaten the dominance of established suppliers.
Memory chips are critical to the servers and computing systems powering AI development. Surging demand has boosted production and revenues, but increased competition threatens to squeeze prices and profit margins.
“The CXMT news appears to have been a clear trigger for the selloff in memory stocks, but I think the bigger story is that investors are becoming much less forgiving of the AI trade,” Charu Chanana, chief investment strategist at Saxo, told Reuters.
Chanana said investors were increasingly questioning how long the industry's extraordinary profits could last.
Separately, CXMT announced on 20 September that its fifth-generation DRAM technology platform had entered mass production, a significant step in China's push to strengthen its domestic semiconductor industry.
However, the breakthrough does not necessarily mean Chinese manufacturers can match established rivals in production capacity, performance or profitability.
The bigger concern for investors is whether rising competition will erode returns on the billions poured into AI infrastructure.
Despite the market turmoil, global chip sales paint a very different picture.
According to World Semiconductor Trade Statistics (WSTS), global semiconductor sales hit $702 billion in the first half of 2026, surging 102 per cent from the same period a year earlier.
Revenue climbed from approximately $299 billion in the first quarter to $403 billion in the second, with second-quarter sales jumping 124 per cent year on year.
Memory chips led the surge, with global sales rocketing 305 per cent in the first half, while logic semiconductor sales rose 45 per cent.
The boom has been driven by soaring investment in AI infrastructure, high-performance computing and advanced memory technology.
These figures suggest Tuesday's sell-off was driven less by weakening demand than by doubts over how much profit chipmakers can retain as competition intensifies.
Manufacturers that have benefited from the AI spending boom now face growing pressure to prove their earnings can withstand an increasingly crowded market.
South Korea was among the region's worst-hit markets, with sharp declines in Samsung Electronics and SK Hynix dragging down the benchmark KOSPI.
Both companies are major suppliers of memory technology used in advanced computing systems, including AI infrastructure. Their shares have become increasingly sensitive to expectations for spending on data centres and computing equipment.
The pressure spread beyond chipmakers. Japan's SoftBank, a major investor in AI-related businesses, slumped 8 per cent, according to Reuters.
The losses reflect a broader shift in sentiment: investors are no longer focused solely on how fast the AI industry can grow, but on which companies will capture the profits.
The market retreat came a day after International Monetary Fund (IMF) Managing Director Kristalina Georgieva said AI investment could boost growth in advanced Asian economies by between 0.5 and one percentage point.
Emerging Asian economies could see gains of between 0.2 and 0.8 percentage points, she estimated.
The forecasts underline AI's potential to drive economic growth, particularly in countries supplying the chips and equipment needed to power the technology.
Yet Tuesday's losses highlight a crucial distinction between the economic benefits of AI investment and the profits investors expect companies to deliver.
Strong chip sales can boost manufacturing, exports and investment even as fierce competition eats into individual companies' margins.
That distinction is particularly important for Asian economies deeply embedded in global AI supply chains.
As technology stocks tumbled, investors sought refuge in government bonds.
The benchmark 10-year U.S. Treasury yield fell five basis points to 5.193 per cent, Reuters reported, pulling back from a 24-year high reached the previous week.
Bond prices typically rise as yields fall, making government debt a potential safe haven during market turbulence.
However, high energy prices, persistent inflation and heavy government borrowing could limit any sustained recovery in bond markets.
Investors are now looking to Wednesday's U.S. inflation data for signals about the Federal Reserve's next move on interest rates.
The latest semiconductor sales figures leave little doubt that global demand for computing technology remains strong. But booming revenues may no longer be enough to satisfy investors.
China's growing chipmaking capabilities, uncertainty over profit margins and higher financing costs are forcing markets to reassess the lofty valuations of companies driving the AI boom.
For Asia's semiconductor giants, the challenge is shifting from meeting demand to defending profits.
Tuesday's sell-off suggests investors increasingly want proof that the AI boom can deliver lasting returns, not just record sales.
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