Chip Selloff Spreads Globally, Apple Makes Smart Home Push

SPEAKER_1 (0:02)

Bloomberg Audio Studios, Podcasts, Radio, News. Bloomberg Tech is live from the heart of Silicon Valley with Ed Ludlow in San Francisco.

Ed Ludlow (0:22)

This is Bloomberg Tech. Coming up, the chip sale off is ramping up with pressure spreading fast from Asia to the US. We'll discuss what's behind it. Plus, Apple releases a new line of smart home devices, including the HomeView Hub, the centerpiece of its push to challenge Amazon and Google in that space. And Meta releases a new AI model, which it says has frontier capabilities, part of its push to take on OpenAI and Anthropic.

A global chip sale off is accelerating. The Philadelphia Semiconductor Index is on course for a fifth straight session of declines, matching the losing streak it posted in July. Overnight, selling spread across Asia. South Korea's stock market plunged. Samsung fell 7%. SK Hynex dropping 10%.

The drive is fresh competition in the memory space from China, rising concerns about the cost of AI, growing doubts about how long the boom can last. Global tech editor Peter Elstrom joins us to try and piece together what's going on.

The pressure is in semiconductors right now. Some of what happened in Asia is specific to the memory space. Let's try and summarize what we're seeing.

Peter Elstrom (1:29)

Yeah, there are quite a few factors going on here. Of course, the general setting is that there's some nervousness around this AI trade that's been driving the stock market for so many months. You know, we saw it go up for a long period of time. The memory companies were big beneficiaries of that. We saw SK Hynix, of course, on a terror in Samsung 2 earlier this year, but that's come back partly because of concerns that memory prices are getting too high, that there'd be some sort of pullback in memory. And now, one of the more recent developments is this week, the CXMT, the fourth player in the memory chip market, the Chinese company, came out and talked about new innovations that they've got in packing memory chips together, and it looks like that added to some of the selling pressure, especially today. What they're talking about is a technique where they go from something called 4F squared, or go from 6F squared to 4F squared in particular. The idea is that you can essentially pack more memory into smaller spaces. It's sort of like using those vacuum packing techniques in your suitcase. You can put in the same number of clothes, but it's going to take up less space. So 4F squared is something that CXMT said they expect to introduce later on this year. This is something that Samsung has not talked about using until 2028 So it looks like they're pushing ahead. CXMT did not provide a whole lot of evidence that they are able to do this, but it's a sign that China is really innovating in some of these key technologies.

Ed Ludlow (2:51)

What an analogy that was with packing.

The point you ended on there is that Samsung and SK Hynix haven't got there yet. Is CXMT a real competitor, a real threat? Is there any evidence that they're kind of chipping away proportionately in the memory market?

Peter Elstrom (3:11)

Well, CXMT is certainly investing very aggressively. They've got a lot of backing domestically. They've got a lot of users within China, which is the biggest chip market. They do not have access to the most advanced chipmaking machines, of course. They can't go to ASML and get the EUV machines that we've talked about in the past. So on that front, there's certainly a couple of steps behind. But they are innovating with some of these design techniques and their goal, of course, is to compete with Samsung and SK Hynix and Micron and try to be a real player here. That comes on top of the other innovations that we've seen come out of China, like Huawei talking about its own chip innovations. And then you've got companies like DeepSeek and AI too. So I think the broader message here is that China is innovating very aggressively and making some real progress.

Ed Ludlow (3:55)

Bloomberg's Peter Elstrom, thank you very much. That's sell-off in Asian chip stocks. Underscore is a bigger question facing the AI trade. Are expectations simply getting too high? I want to bring in Christina Hooper, Chief Market Strategist at Mangroo. And Christina, I know you're kind of in the camp that there are several data points that serve as evidence that we could have some kind of re-rating in AI related stocks. In the here and now, that is specifically in semiconductors. It's where we see the movement. What are those data points that you're most focused on?