AI investors spark Asia shares sell-off

**Luke Wilson** (0:01)
South Korea's stock market is hit by a tech sell-off. It's World Business Express from the BBC World Service. I'm Luke Wilson.
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Two of South Korea's biggest chip makers have seen their share prices drop after a sell-off on Asian markets. SK Hynix dropped nearly 15%, while Samsung fell more than 13%. The two tech giants make up so much of Seoul's Kospi index that trading was stopped to try to contain the volatility and the whole index closed down more than 10%. Maura Fogarty is our Asia business editor in Singapore.

**Maura Fogarty** (0:51)
It's a lot of nervousness that we've been seeing in chip stocks, both in South Korea, but also across other countries, for example, in Japan, as well as in Taiwan, which is another big chip making powerhouse. The worry here is that, of course, is the spending in building out AI infrastructure around the world sustainable?
And it comes up because of questions over this idea of circular financing. Now, the Wall Street Journal ran a report that said that NVIDIA was in talks with OpenAI to provide a financial backstop, a guarantee, so to speak, for OpenAI's plans to build this massive data center in the US. And what NVIDIA is doing is essentially saying, hey, we'll provide a financial guarantee for you to build this data center, which in turn, by the way, needs chips from NVIDIA, right? So the idea of this sort of like, you know, in some ways, is NVIDIA potentially financing its own customers, has gotten a lot of investors worried about how sustainable all this spending really is.
That caused NVIDIA shares to fall in the US overnight. And that pessimism or worry or nervousness, you could say, is what's seeping through the Asian markets today.

**Luke Wilson** (2:07)
More of a foggy in Singapore. Well, this comes after the Chinese chip maker CXMT saw its share price soar as it made its debut in Shanghai yesterday. How much of this is about Chinese chip makers stepping up their game? I asked Chris Miller, microchip experts and author of the book Chip War.

**Chris Miller** (2:25)
Well, we've seen some improvements in the capabilities of Chinese chip makers, less improvement in the capabilities of the companies in China that make the tools that manufacture chips. But mostly, I think, Chinese chip makers remain far behind their competitors in the United States, in Korea, and most importantly, in Taiwan.

**Luke Wilson** (2:47)
We had this debut yesterday of CXMT, the Chinese chip maker, big debut, climbed something like 500%. And then obviously, we've had this sell off today. Do you think we could see more of these sort of market events with these big chip making stocks?

**Chris Miller** (3:02)
There's a lot of optimism in the Chinese market over Chinese chip makers. But what we see across the board is that Chinese chip makers are generally less profitable than their Western competitors because they have less advanced technology. CXMT is a case in point. It's true it can make memory chips, but the chips that it makes are less capable and less profitable than those produced by Korean or American firms.

**Luke Wilson** (3:25)
And do they rely on other companies in the chip making space?

**Chris Miller** (3:29)
They do. Every advanced memory manufacturer, including those in China, needs to acquire tools from Western manufacturers of chip making equipment, companies from the United States, from Japan, and most importantly, from the Netherlands. And the key for advanced memory chips is acquiring equipment from a company called ASML based in Netherlands, which Chinese firms can't buy. So right now, the Chinese memory ecosystem, the overall Chinese chip making ecosystem is held back by the fact that they can't acquire these ultra critical chip manufacturing tools.

**Luke Wilson** (4:02)
And the other companies you mentioned, the likes of ASML, the likes of TSMC in Taiwan, is China and Chinese companies catching up to them, or are they kind of making headway themselves as well?

**Chris Miller** (4:13)
When it comes to TSMC, the world's leading chip maker, they've actually expanded their lead in technology over their primary Chinese competitor, a company called SMIC. When you look at the companies that make the tools that make chips, the machines that are inside of factories of companies like TSMC, there we have less good data about the actual quality of Chinese competitors. But by any metric, they're many years behind when it comes to the most complex and sophisticated of the machines that are used to manufacture semiconductors.