Why tech stocks jumped off a cliff

With markets just torching half a trillion in a day, it's time for a quick global tour of the wreckage, starting in...

1. 🇺🇸 ‘Murica

The big memory and chip names have led this week’s US carnage, with Micron and Sandisk down ~13% in a day, while Intel, AMD, and Qualcomm each shed 6-8%. In parallel, SpaceX extended its post-IPO sell-off, losing all its initial 30% gains to now edge back below its listing value. That's a $300B see-saw for Elon alone.

So what's going on? There are historic egos and fortunes on the line, but indulge us these three quick observations:

• i) A $19B-revenue firm (SpaceX) getting a $2.5T valuation was always a big bet on the future, and that brings vulnerability to sentiment swings in the meantime

• ii) AI-tied names have led most of this year's gains, so a bit of capital rotation / profit-taking is inevitable (plus Micron's big earnings report is due today), but...

• iii) While today's winner-takes-all hyperscaler logic holds, investors might start pricing in doubts around execution, burn, payoff, and even commoditisation.

But of course, none of this is happening in a vacuum. To the contrary, this US rout seemed fanned by some wild overnight news out of...

2. 🇰🇷 South Korea

Korea's KOSPI stock index triggered another circuit-breaker trading suspension Tuesday, driven by memory chipmakers Samsung and Hynix plunging 12%. So what's going on?

One spark might’ve been Hynix announcing it’s shifting some production lines away from its next-gen high-bandwidth memory in pursuit of shorter-term profits — some took it as a signal of softer AI capex momentum. But that aside, Korea is also seeing a mix of...

• i) Concentration — these two stocks alone make up nearly half Korea’s index

• ii) Leverage — Korea's retail investors (dubbed 'ants') just hit an all-time high margin debt of ~$25B, with tales of folks even surrendering life insurance policies to go all-in, and that's all driving...

• iii) Volatility — Korea had zero full circuit-breakers last year, versus four in the last six months alone. And rumours of a Samsung share buyback just sent the KOSPI roaring right back up today.

But the real heart of the global AI stack arguably still sits 800km across the strait in...

3. 🇹🇼 Taiwan

Whereas it takes two firms to make up almost half Korea's KOSPI index, in Taiwan it only takes one: legendary chipmaker TSMC has been on such a run, it's now single-handedly pushed Taiwan's market cap into fifth place ahead of more populous Korea and even India.

What's going on?

• i) As AI's foundry backbone with sold-out capacity and long-term contracts, there's probably less mania at play (it's up ~50% this year vs Samsung's ~200%)

• ii) But there's still a dash of retail revelry, captured in a young local guy's quote now doing the rounds ("Buy any stock and you will make money"), and

• iii) While local TSMC shares have held pretty steady this week, their US-traded version (ADRs) plunged 6-7% yesterday. There are technical drivers (liquidity, USD access), but that kind of spread has historically hinted at frothiness in the US.

So okay, then let's wrap with a visit to the West's big AI moat over in...

4. 🇳🇱 The Netherlands

ASML, the Dutch monopoly over extreme ultraviolet lithography machines (the only tools still capable of making cutting-edge AI chips) crashed 7% Tuesday, partly reflecting the broader tech sell-off we've explored above, but also some very intriguing US claims that China might've gotten its hands on this tightly-controlled tech.

To wrap, indulge us these final three observations:

• i) ASML rejects the claims — how do you hide a machine bigger than two jumbos?

• ii) Debate is now whether China smuggled (or reverse-engineered) key parts, but

• iii) On specific parts, there's even now speculation the US commerce department (which first made the above claims) is just pumping its own tyres via its new $150M stake in xLight, a US startup hoping to eventually weaken ASML's hold.

Now to be clear, this entire final Dutch section all stems from a single scoop, but the bigger picture is what grabs us — could investors now be starting to price in the possibility that the West's last big tech firewall might eventually crack?

And to be even clearer, all the above stocks (ex SpaceX) are still way above where they started on January 1st.

Sound even smarter:

• Nvidia’s banned AI chips have reportedly now doubled in price on China’s black market.