r/investing
AI stocks sell off globally，SK Hynix drops 12%…crash or healthy correction？
Global AI stocks fell on profit-taking and leverage, but strong HBM demand and AI capex suggest a healthy correction, not a crash.
- AI fundamentals remain intact with HBM still acting as a bottleneck and the memory cycle continuing.
- AI capital expenditure has not significantly contracted, supporting long-term industry demand.
- The current sell-off is driven by trading structures and profit-taking rather than a breakdown in fundamentals.
- Tech stocks were crowded beforehand and are vulnerable to disruptions from shifting interest rate expectations.
- The market is extremely sensitive to imperfect information or rumors, magnifying them into reasons to sell.
- Leverage and ETF structures in markets like South Korea amplify volatility and trigger forced selling chain reactions.
The global AI sector’s decline today has honestly made many people feel a bit panicked at first glance, especially in South Korea, where SK Hynix once dropped more than 10%, Samsung Electronics followed suit, leveraged ETFs saw amplified sell-offs, and Nasdaq futures in the U.S. also weakened in sync. The entire AI chain looked like it suddenly hit the brakes hard. But looking at it calmly, this move looks more like a concentrated cooling-off after a high, rather than a problem with fundamentals
South Korea was hit the hardest mainly because it acts as an emotional amplifier for AI memory chips. SK Hynix had risen too much beforehand, even briefly surpassing Samsung in market value. At such levels, it naturally becomes the first target for profit-taking. Once sentiment weakens, the strongest prior winners are often the first to be sold
At the same time, the market is now extremely sensitive to any “imperfect information.” For example, rumors related to HBM and DRAM can easily be magnified into reasons to sell in a high-position environment, because capital has already shifted from chasing gains to locking in profits. In addition, Korea’s heavy leverage and ETF structures mean that once prices fall, they can trigger forced selling, creating a chain reaction of index pressure → worsening sentiment → further stop-losses. So while the declines look dramatic, they are more a result of trading structure amplifying volatility rather than a breakdown in industry fundamentals
The logic in U.S. equities is similar. Tech stocks were already crowded beforehand, and with interest rate expectations disrupting high-valuation assets, AI-related stocks were easily pulled down together. But fundamentals have not changed: HBM remains a bottleneck, the memory cycle is still ongoing, and AI capital expenditure has not significantly contracted. The key will be Micron’s earnings report to validate pricing and demand
So the situation now looks more like a shift from “buy AI blindly” to “needing to prove continued outperformance.” The market is moving from storytelling to earnings validation. Going forward, the focus will be on three things: US market stability, Micron’s guidance, and interest rate trends. If things stabilize, this is more likely a sentiment reset rather than a trend reversal. AI is not over, it’s just that the way it is traded has changed
AI slop
Green by close
My portfolio has \~25% of investment in SK Hynix and here's my take:
- The 12% drop by all means does not reflect anything negative about SK Hynix's earnings ability and its leadership in the HBM market.
- The 12% drop is mostly triggered by South Korea highest financial regulator's criticism towards leveraged ETFs tracking either SK Hynix, Samsung or both. Retail investors in South Korea are gambling with these ETFs, which to some extent, are incentivised by security providers.
- The second trigger is because Mag 7 are suffering from equity drawdowns (again, not earnings), so as a key supplier, SK would also suffer.
- Obviously you could argue that people think valuations are stretched and hence taking the profits but this is as vague as it could get without data.
Things I'd pay close attention to/be aware:
- Micron's earnings report on Wednesday. An indicator of whether the memory sector deserves it's fast-growing trading multiples. Micron has the most expensive trading multiples, so it's fair that its performance, at the very least, is a starting point to justify the sector's valuation.
- If you look from a trading multiples perspective (e.g. P/S, P/E, P/B, EV/EBITDA and EV/(EBITDA-CAPEX), SK Hynix is ridiculously cheaper than Micron maybe due to the Korean discount but whatever. Cross-sector wise, memory also tends to be cheaper than compute, manufacturing and networking sectors. Now pair that up with SK Hynix's dominance in HBM3/3E, HBM4/4E, I have little doubt about the company's future prospect.
- Korean stocks are known to be significantly more volatile relative to it's asian peers, let alone the US. So I'd be extra cautious to structure investment decisions purely on the price charts.
Everything is squeezed out of my brain, no AI is used so do not criticise my writing. Criticise my analysis, thanks.
Theres various worries cropping up for “tech/AI” (higher borrowing costs for tech, circular risks as deals are inside the sector, more consumers dipping into savings, etc..) but, .. silver lining, IBM is gaining as of now!
I loved reddit for real analysis made by humans
So much AI these days they should put up a filter or detector for this slop