AI Trade Reversal Pierces Asia’s Star Picks-and-Shovels Stocks

An eight-session rout in US semiconductor shares — the longest since 2008 — wiped roughly 16% off the sector’s benchmark, while the Nasdaq 100 suffered its worst week since April 2025. For Asia, where chipmakers and the hardware suppliers that make printed-circuit boards, precision components and manufacturing equipment have been among the biggest beneficiaries of the AI frenzy, the implications could be significant heading into Monday’s open.

A Goldman Sachs Group Inc. basket of regional AI hardware stocks tumbled 11% last week, its steepest decline since mid-July. The selloff showed little sign of abating despite an upbeat revenue outlook from Taiwan Semiconductor Manufacturing Co., underscoring how concerns over AI spending are spreading across the hardware supply chain. Some of Asia’s standout performers were hit particularly hard in the maelstrom.

Nan Ya Plastics Corp., a maker of printed circuit board materials and the best-performing stock on the MSCI Asia-Pacific Index this year, tumbled 12% from a record high. Rival Unimicron Technology Corp., the index’s second-best performer, fell 14% in a week, while Samsung Electro-Mechanics Co., which makes an array of electronic components, plunged 23%. “Financing costs are like gravity for the AI boom,” said Jian Shi Cortesi, a fund manager at GAM Investment Management in Zurich.

“Rising borrowing costs could make infrastructure projects harder to finance and delay spending. Even a delay could trigger a reset in Asian suppliers’ earnings expectations and valuations.” The concern is no longer just whether demand for AI chips will hold up. It’s whether hyperscalers and neocloud operators can keep financing the infrastructure needed to deploy them — and whether the expected returns will justify the scale of investment.

Bonds of neocloud provider CoreWeave Inc. sank to levels signaling distress last week as investors questioned whether AI demand and revenue could support the borrowing behind its expansion. Its shares slumped 12% on Friday, resulting in the stock’s worst week since November with a 25% drop. The episode brought the financing risks of the boom into sharper focus, with surging oil prices adding to worries that inflation could keep borrowing costs elevated.

While TSMC, SK Hynix Inc. and Samsung Electronics Co. supply the chips and memory needed for AI computing, their earnings ultimately depend on continued investment in the infrastructure that uses those products. Component makers and equipment suppliers face the same underlying risk, potentially with less visibility into the timing of individual projects. “AI funding stress is a bigger challenge for downstream beneficiaries than for the core compute ecosystem,” said Kevin Net, portfolio manager at Financiere de l’Echiquier in Paris.

“Basically, the further away you get from the actual chip, the greater the risk you might see timing delays.” Warnings about funding risks have come from industry executives, including Broadcom Inc. Chief Executive Officer Hock Tan, who said capital, rather than shortages of memory chips or manufacturing capacity, would become the biggest constraint on AI growth. Gartner Inc. has warned that more than $3.5 trillion of AI infrastructure spending could be at risk of impairment by 2030 as investment threatens to outpace the revenue needed to justify it.

“If hyperscalers and neoclouds cannot fund their datacenter investments, that would translate into lower orders for Asia enablers like TSMC, Samsung and SK Hynix,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “Given how jittery the market is, the read-through would be very negative for the semi picks and shovels.” The stakes are particularly high for Asian equities, where the AI buildout has become a dominant investment theme.

TSMC, Samsung and SK Hynix together account for nearly a third of the MSCI Asia ex-Japan Index and about a fifth of the index provider’s broader Asian gauge, with their suppliers adding to the region’s exposure to the same spending cycle, according to data compiled by Bloomberg. Eight of the 10 best-performing companies in the MSCI Asia-Pacific Index this year are component makers, each having gained at least 236%.

Those gains leave earnings expectations and valuations vulnerable if spending growth slows or projects are pushed back. Still, there is little evidence so far that financing strains have translated into weaker orders, and some investors remain confident that robust demand will sustain the sector. “We are not worried about the ongoing chip selloff,” as demand for AI remains strong, said Kunjal Gala, head of global emerging markets at Federated Hermes Ltd. in London. Gala’s fund is overweight on Korea and owns TSMC shares. --With assistance from Sunny Bangia. More stories like this are available on bloomberg.com