US Chip Stocks Plunge as AI Selloff Ripples Across From Asia

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.
This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead, with insight on the people, companies, and trends shaping today's complex economy, plus global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily podcast with Carol Massar and Tim Stenovec on Bloomberg Radio.

**Tim Stenovec** (0:32)
Bruising selloff in several tech giants, fueling concern that the AI frenzy that has powered the equity bull market might be overblown.

**SPEAKER_1** (0:39)
Yeah.

**Carol Massar** (0:39)
Well, we saw the NASDAQ 100 sinking about 3% earlier. The SOX, the key gauge of trip makers that had doubled from war-driven lows sliding about 7% losses.

**Tim Stenovec** (0:49)
Now it's down 8.3% since I wrote that earlier.

**Carol Massar** (0:52)
So it's really come under a lot of pressure. And if you take a look at what happened in terms of the trade overnight, especially in Asia, South Korea's KOSPI plunging 10% from a record. But that market is so reliant on really two, a couple of big names that have really-

**Tim Stenovec** (1:05)
That's K-Hynix among them, yeah.

**Carol Massar** (1:07)
Yeah. Again, that trade, the chip trade and the tech trade. So you're wondering, is it a reset, a new narrative? I don't know. We'll see what Amanda Lyons has to say.

**Tim Stenovec** (1:15)
Amanda Lyons is head of research at Energy Group Capital. It's a hedge fund manager focused on energy, natural resources and power. Amanda covering technology there. She joins us from London. So is it a fundamental change to the AI story?

**Amanda Lyons** (1:29)
Hi. Thanks for having me on.
I don't think we're seeing a change in that fundamental AI story, but we have to be a little bit more cautious and a little bit more nervous as these things happen. I mean, if we look at what's happened today, the fundamentals regarding AI haven't really changed. We've had a few headlines out of Korea beyond all of the concerns with the leveraged ETFs. We've seen some headlines with Samsung managing to get their HBM4 revenues up, which then has some questions on supply and demand dynamics. But fundamentally, things aren't falling off a cliff. It's more a positioning issue than a fundamental issue at this point.

**Carol Massar** (2:14)
But what does it mean if SK Hynix, according to a local media report, let's give it some attribution there, was slowing expansion of AI memory chip production and shifting emphasis to the cheaper commodity DRAM. Is that just maybe normal?
Figure out what their customers need. It's not something more significant or problematic to the AI spend and trade.

**Amanda Lyons** (2:37)
Well, I think the first thing to look out of the overall supply from that is it's a mix shift. So we're having the supply dynamic overall doesn't actually change with that. We're just shifting it from product A to product B.

**Carol Massar** (2:51)
Is it less profitable and does it also say something about AI specifically?

**Amanda Lyons** (2:55)
Yeah. So the important bit for me or the tell for me in this is that they're acting rationally in a way you would want a company to do is that they're shifting their production to the highest margin, the most profitable part. This is counter to the narrative we've been having coming out of these memory companies pretty much for this year where you're having this narrative of this time the cycle is different, this time we're seeing more rational. Whereas actually when you look at their behavior, they're still trying to maximize profitability.
Then when you try and extrapolate that forward to actual supply, although this headline doesn't change the total amount of supply in the market, you've got to assume that you're going to start seeing increases in supply. We've already started hearing comments along these levels from all of the memory players, which leads you to believe at some point that supply dynamic shifts from being massively supply constrained to too much supply, and that cyclicality returns to all of these names, and you don't want to be in them at the point that happens. We're not there yet, but to me, it's the first part of a warning sign.

**Tim Stenovec** (4:08)
Wait, this is just when the Wall Street Journal reported that Tim Cook said that Apple is going to raise prices as the result of the higher memory prices. Did we peak in this cycle?

**Amanda Lyons** (4:21)
No. I don't think we've hit that peak yet. When we get to Mike Brown's earnings tomorrow night, I think we're going to get a little bit more color on that, and I imagine they're going to suggest that we're not at that peak point yet. But I think the key point is there is going to be a peak, and it does turn at some point.