The semiconductor industry in Asia experienced a downturn on Wednesday morning as a result of the steep decline in Nvidia’s share price in the U.S. This drop had a ripple effect on other semiconductor stocks, leading to a sell-off on Wall Street. The economic data released on Tuesday added to the already existing concerns about the health of the U.S. economy, further impacting the semiconductor sector.
Connection to South Korea
The repercussions of Nvidia’s share price plunge were felt in South Korea, particularly by companies like memory chip maker SK Hynix and electronics giant Samsung Electronics. SK Hynix, which provides high bandwidth memory chips to Nvidia for use in AI chipsets, saw its stock value decrease by more than 6%. Similarly, Samsung Electronics shares slid by 2.6%, contributing to a 2.5% decline in the Kospi index and a 3% fall in the Kosdaq.
The indirect suppliers of Nvidia, such as Tokyo Electron and Advantest, also experienced stock declines following Nvidia’s plunge. Tokyo Electron saw a 7% drop, while Advantest shed more than 8%. Additionally, Japanese investment holding company SoftBank Group, which has a stake in chip designer Arm, fell by 6%. These interconnected relationships within the semiconductor industry highlight the vulnerability of the market to external factors.
Contract chip manufacturer Taiwan Semiconductor Manufacturing Company (TSMC), responsible for producing Nvidia’s high-performance graphics processing units, faced a decline of 4.3% in its stock value. TSMC plays a crucial role in manufacturing components that power machine learning programs like large language models. This interconnectedness extends to Taiwan’s Hon Hai Precision Industry, known as Foxconn, which lost 5% due to its strategic partnership with Nvidia.
The collective effect of Nvidia’s stock loss resulted in significant market cap erosion, with the company losing $279 billion in value on Tuesday stateside. This decline underscores the interconnectedness and interdependence of global semiconductor markets and the vulnerability of these stocks to external shocks. It serves as a reminder of the potential risks associated with investing in the semiconductor industry and the importance of closely monitoring market dynamics for all stakeholders involved.