Global sell-off pummels AI-linked chip makers as US inflation fears and structural doubts about the memory boom converge

South Korea’s Kospi 200 fell 8.1% to a six-month closing low overnight, triggering circuit breakers that halted trading at various points, as SK Hynix and Samsung Electronics led a rout among memory chip makers.

The carnage spread across continents. Japan’s Nikkei 225 dropped 4.9% on Thursday. On Wall Street, the Nasdaq Composite fell 1.9% and the S&P 500 dropped 1.1%, its worst performance since July. China’s Shanghai Shenzhen CSI 300 slipped as much as 2.4%, hitting its lowest level since August 2025. European stocks were lower at the open, with the Stoxx 600 down 0.4%. “Markets have just had an incredibly tumultuous 24 hours, as a strong US CPI print was then followed up with mounting fears around the AI trade,” Deutsche Bank analysts led by Jim Reid said.

Inflation and rate fears fuel the rout

US inflation jumped to 3.7% in September, the fastest increase since CPI hit a three-year peak of 4.2% in May. The rise was broad-based across the consumer basket, not driven solely by energy costs, though geopolitical tensions including ripple effects from the US war on Iran have pushed up fuel prices. Some investors are now pricing in another Federal Reserve rate increase as soon as the end of the month.

Memory makers bear the brunt

SK Hynix plunged nearly 11% and Samsung fell 9.5% in the session. Over the last five days, SK Hynix has plunged 26%, Samsung has tanked 22%, and Micron has dropped around 11%. Samsung, SK Hynix, and Micron are the three biggest memory makers, and memory chips have become a key component of Nvidia chips and the data center supply chain due to the AI boom. Kioxia slumped 11% and SoftBank dropped 10%. SoftBank is a big investor in OpenAI. TSMC fell 2% despite reporting its sixth straight quarter of profits.

IMF flags AI correction risk

The IMF warned this week that an AI share price crash could put world financial stability at risk. Asian markets would be most exposed to an AI correction, the IMF said, with the UK and eurozone potentially more insulated.

Supply fears and the cycle ahead

China’s CXMT announced plans at the start of the week to roll out a server memory product based on new architecture allowing higher storage density, raising concerns about competitive pressure on the three biggest memory makers. Ben Barringer, global head of technology research at Quilter Cheviot, questioned whether CXMT can achieve viable yields. “The issue, of course, was with any architectural change ... you can make the chips, but what yield are you getting? If you’re only getting a 50% yield, you’re literally putting half the chips in the bin because they don’t work very well,” he said. Kevin Cassidy of Rosenblatt Securities dismissed the threat, telling CNBC, “We don’t think this is going to swing the supply-demand equation at all.” It takes around three to five years for a memory chip factory to come online, and many analysts forecast the memory shortage won’t ease until 2028. Counterpoint Research sees DRAM prices falling around 23% in 2028 compared with 2027. Professor Hwang of Seoul National University and Ahn Ki-hyun of the Korea Semiconductor Industry Association expect a “flood of new supply” turning the memory market “into a red ocean” in 2029. A Maeil Business Newspaper column said by 2030 “the supercycle could be over and the industry could enter a downturn.” All major memory makers are currently expanding capacity.

Nasdaq 100 futures dropped 1%.