Asian tech stocks followed the decline in US chip stocks! SoftBank fell more than 9%, and Kioxia fell more than 15%

The Zhitong Finance App learned that due to a new round of sharp decline in US chip stocks, Asian technology stocks fell sharply on Friday, and market concerns about artificial intelligence (AI) spending further heated up. On Friday, as of press release, SoftBank is down more than 9%, chip equipment manufacturer Tokyo Electronics is down more than 8%, Edwin Test is down more than 10%, and Renesas Electronics is down more than 8%. Japanese memory chip maker Kioxia plummeted by more than 15%. Earlier, a federal jury in Texas ruled on Thursday that the company infringed Viasat's patent relating to computer storage technology and ordered it to pay compensation of US$229 million. Meanwhile, the Korean market is closed due to public holidays.

After several months of sharp increases, global AI-related stocks have continued to pull back sharply recently. As investment in AI infrastructure continues to accelerate, investors are increasingly questioning whether the current high valuation level can continue.

In addition to the Japanese stock market, A-shares and Hong Kong stocks also weakened. The decline in the Asian market continued the weak overnight performance of US tech stocks — the Nasdaq Composite Index fell 1.47%, and chip stocks were once again under pressure. Vaneck semiconductor ETF fell nearly 4%, and Arm (ARM.US) fell more than 5%; Micron (MU.US), AMD (AMD.US), and Broadcom (AVGO.US) all fell more than 5%, while the stock price of SKHY.US (SKHY.US), which is listed in the US, plummeted by more than 13%.

Although TSM.US raised its annual capital expenditure forecast from 52 billion to 56 billion US dollars to 60 billion to 64 billion US dollars, the focus of investors has turned to the question of whether the industry's aggressive investment cycle is becoming more and more difficult to sustain.

Andrew Jackson, strategist at Ortus Advisors, said, “US technology stocks and the AI sector have once again experienced a complete sell-off, and recently the strongest performing stocks have declined further. The reason is that the financial report released by TSMC in Asia yesterday was not considered sufficient by the market to support a further rise in the sector; on the contrary, it raised concerns about excessive spending in the AI field.” He added that this round of sell-offs reflects concentrated liquidation of crowded positions in popular AI transactions, rather than a deterioration in the long-term fundamentals of the industry.

xFunds trader Louis Kondratiev said that the recent pullback reflects that trading in the semiconductor sector has become too crowded as AI continues to drive. He said, “Currently, the semiconductor sector alone accounts for about 20% of the weight of the S&P 500 index. It is extremely difficult to maintain this share for a long time.” He pointed out that during the Internet bubble in 2000, the weight of the semiconductor sector in the S&P 500 index was only slightly above 8%, while the historical average was usually between 2% and 5%.

He also said that although corporate profits are still growing strongly, this upward trend may become more and more difficult to sustain in the future as investors re-evaluate excessive valuation levels. He pointed out, “Profit growth momentum has always been very strong, but it is mainly concentrated in the semiconductor industry, and as valuations gradually return to a reasonable level, this growth momentum may begin to slow.”

Furthermore, the latest fund manager survey report released by Wall Street financial giant Bank of America shows that global investors who are aggressively buying stocks should actively consider reducing their exposure to risky asset allocation. The core judgment of the Bank of America strategist team is not that the fundamentals of global technology stocks or the AI computing power industry are about to fall into a downward trajectory, but rather that investors' extreme optimism, bullish stock positions and strong profit expectations, and continued valuation expansion have seriously overdrawn fundamental growth prospects for the next 1-2 years or so, causing the marginal risk-return of risk assets to deteriorate significantly. This is reflected in the fact that fund managers' share of cash plummeted from 4.1% to a very low level of 3.6%, and the Bull and Bear Index reached a pessimistic score of 9.4 out of 10.

Therefore, the Bank of America strategist team led by Bank of America strategist Michael Hartnett, who has the title of “Wall Street's Most Promising Strategist,” suggests taking a wait-and-see stance to reduce stocks and high beta exposure as much as possible. The essence of the latest forecast is also to remind investors that the long-term trend on the AI computing power theme is still there, but extreme semiconductor trading congestion, extreme leveraged positions, low cash buffers, and the risk of medium- to long-term growth in overdraft pricing and capital expenditure cooling risks. The outlook may suppress the summer market and amplify the retracement of valuations caused by any slight weakness.