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Asian shares fell to their lowest level in more than two months on Tuesday. Despite rising global sales by chipmakers, technological advances by Chinese companies have weakened investor confidence in the artificial intelligence (AI) boom.
According to Reuters, shares in Asia’s semiconductor companies led sharp declines across regional markets. Investors questioned how long the AI boom could sustain record profits as competition from China intensifies.
The broadest MSCI index tracking Asia-Pacific shares outside Japan fell more than 2%, reaching its lowest level since late July.
South Korea’s benchmark KOSPI index dropped more than 6%, its steepest daily decline since July. Japan’s Nikkei fell 2.6%, while Taiwan’s market declined 2%.
Memory chipmakers were among the hardest hit. Shares in Samsung Electronics fell 8%, SK Hynix dropped 10% and Japan’s Kioxia Holdings slid 14%. Taiwan Semiconductor Manufacturing Company (TSMC) declined 1.8%.
In China, the CSI300 index fell 0.6% by midday, reaching its lowest level since August 2025. The Shanghai Composite dropped 0.3% to a three-month low. Despite reports of technological advances, shares in memory chipmaker CXMT fell as much as 5.3%. Hong Kong’s Hang Seng Tech index declined 1.5%, Reuters reported.
The market decline has highlighted a gap between rapidly rising semiconductor sales and concerns about the industry’s future profitability.
China’s chip advances concern investors
The sell-off intensified after reports of technological gains by Chinese memory chipmaker ChangXin Memory Technologies (CXMT). Investors fear that growing competition could weaken established suppliers’ market advantage.
Memory chips are essential components in the servers and computing equipment that power AI systems. Surging demand has boosted production and revenue, but increased competition could put pressure on prices and profit margins.
Charu Chanana, chief investment strategist at Saxo, told Reuters that the news about CXMT directly prompted the decline in memory chip shares. More broadly, she said, investors are taking a more demanding approach to AI investments than before.
Chanana said investors are increasingly questioning how long the industry’s unusually high returns can last.
CXMT said on Sept. 20 that it had begun mass production using its fifth-generation DRAM technology platform. This marks a significant step in China’s efforts to strengthen its domestic semiconductor industry.
However, the advance does not mean Chinese manufacturers have caught up with established competitors in production capacity, yield or profitability. Investors are more concerned that intensifying competition could reduce returns on the billions of dollars invested in AI infrastructure.
Semiconductor sales are rising rapidly
Despite market volatility, global chip sales paint a different picture. According to the World Semiconductor Trade Statistics (WSTS), global semiconductor sales reached $702 billion in the first half of 2026, up 102% from the same period last year.
Revenue rose from about $299 billion in the first quarter to $403 billion in the second. Second-quarter sales increased 124% year over year.
Memory chips led the growth, with global sales rising 305% in the first half. Sales of logic semiconductors increased 45%.
The growth has been supported by investment in AI infrastructure, high-performance computing systems and advanced memory technologies. The figures suggest Tuesday’s sell-off stemmed less from weakening demand than from doubts about how much profit companies can retain as competition intensifies.
Manufacturers benefiting from the AI investment boom must now prove their earnings can hold up in a more competitive environment.
South Korean chipmakers’ shares tumble
Declines in Samsung Electronics and SK Hynix shares also weighed heavily on South Korea’s market, accelerating the KOSPI’s fall.
Both companies are major suppliers of memory technologies used in advanced computing systems, including AI infrastructure. Their shares are increasingly sensitive to expectations for spending on data centers and computing equipment.
The pressure extended beyond chipmakers. Shares in Japan’s SoftBank, which has made major investments in AI-related companies, fell 8%, Reuters reported.
The declines reflect a broader shift in investor sentiment: market participants are focusing not only on how quickly the AI industry will grow, but also on which companies will capture the resulting revenue.
AI growth forecasts come under investor scrutiny
The market downturn came a day after International Monetary Fund Managing Director Kristalina Georgieva said AI investment could accelerate growth in Asia’s advanced economies by 0.5 to 1 percentage point.
According to Georgieva’s assessment, growth in developing Asian economies could rise by 0.2 to 0.8 percentage points.
The forecasts point to the potential for AI investment to support economic growth, particularly in countries that produce the chips and equipment needed to run the technology. However, Tuesday’s decline underscored the gap between AI investment’s economic benefits and the profits investors expect companies to earn.
Rising chip sales can support production, exports and investment, but strong competition may reduce individual companies’ profit margins. This distinction is particularly important for Asian economies that play a significant role in the global AI supply chain.
Investors turn to government bonds
As technology shares fell, investors turned to government bonds. According to Reuters, the yield on 10-year U.S. Treasury notes fell 5 basis points to 5.193%. The yield had reached its highest level in 24 years late the previous week.
Bond prices generally rise when yields fall. Government debt securities can therefore be seen as safe-haven assets during periods of market volatility. However, high energy prices, persistent inflation and rising government borrowing could limit any potential recovery in the bond market.
Investors are awaiting U.S. inflation data due on Wednesday for signals about the Federal Reserve’s next move on interest rates.
Semiconductor sales figures show that global demand for computing technology remains strong. But rising revenue alone may no longer be enough to satisfy investors.
Expanding chipmaking capacity in China, uncertainty over profit margins and higher financing costs are prompting markets to reassess the high valuations of companies leading the AI boom. For Asia’s semiconductor giants, the main challenge has shifted from meeting demand to protecting profits.
Tuesday’s decline shows that investors are looking for evidence of the AI boom’s long-term profitability, not just record sales.
