Global Market Selling: Amid concerns over high valuations, investors in semiconductor or chip companies worldwide started booking profits, leading to chaos in markets. Between the U.S. and Asian markets, a massive sell-off resulted in the loss of $50,000 crore (₹44.4 lakh crore). Due to concerns about high valuations, investors rushed to take profits, causing companies’ market caps to fall by over $50 billion. TSMC, the world’s largest chip-making company, dropped by more than 3%. TSMC is a Taiwanese semiconductor contract manufacturing and design company.
With the pressure of selling in chip companies and a decline in the Philadelphia Semiconductor Index, the global market cap of chip companies fell by over $50,000 crore. The Philadelphia Semiconductor Index (PHLX Semiconductor Sector) is an indicator of fluctuations in the 30 largest chip companies in the U.S.
How is the Asian Market Faring?
Starting with the Asian market, the most significant decline was seen in South Korea, where the equity benchmark index KOSPI dropped by over 3% on Wednesday, November 5. This was due to profit-taking in Samsung Electronics and SK Hynix, both of which saw a drop of 6% or more. These companies had performed well this year, with Samsung Electronics’ shares rising 80% and SK Hynix’s shares surging more than 200%.
In Japan, shares of Advantest Corporation fell by more than 10%, putting pressure on the equity benchmark Nikkei 225, which dropped by more than 3%.
What’s Happening in the U.S. Market?
In the U.S., the stock market had reached new heights, partly due to the rise in AI-related companies. These stocks had shown strong performance, disregarding concerns over high valuations and the prolonged period of high interest rates. However, on Tuesday, the sell-off in the U.S. market began with Palantir, when, despite strong earnings, its shares dropped by more than 8%. The stock has risen more than 175% this year and is trading at more than 80 times its forward earnings for the next year, making it the most expensive stock in the S&P 500 index.
Additionally, Nvidia’s competitor AMD faced a weaker outlook, further disappointing investors.
What Do the Experts Say?
Chris Weston, Head of Research at Pepperstone Group, believes that the chaos in global markets could continue. He states that currently, there is no reason to buy. Xin-Yao Ng, a fund manager at Aberdeen Investments, says this is a necessary and healthy correction. He believes that while the AI bubble has not yet burst, it may not take long for it to do so if the sell-off in some AI stocks continues.
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