Nearly four years have passed since OpenAI launched ChatGPT, and the capital flow generated by artificial intelligence investments has spread to a wide range of areas, from semiconductor manufacturers to data center companies, from cable manufacturers to infrastructure providers.
However, the cracks that started to appear in June are getting bigger. The cancellation of the public offering of a data center company in Australia last week and the fact that credit investors began to act more selectively in the borrowing of artificial intelligence companies revealed the change in risk perception towards the sector.
HARD SELL IN KOREA AND JAPAN
In Asian markets, sales at South Korean chip makers moved into the fifth day on Tuesday.
As sales accelerated, South Korea's KOSPI index fell by more than 6 percent.
Shares of Tokyo-listed memory chip maker Kioxia fell 13 percent, leading losses in artificial intelligence-related companies.
In South Korea, Samsung Electronics shares lost 10 percent and SK Hynix shares lost 8 percent.
KOSPI fell nearly 25 percent from its peak in July, experiencing the longest series of declines in more than two years.
China's tech-heavy STAR Market index has also lost more than a third of its value from its peak in July.
BOND INTEREST RATES INCREASE THE PRESSURE
Wilson Asset Management Portfolio Strategist Damien Boey said that not only the rise in bond interest rates but also the volatility in the bond market has begun to affect asset prices.
Boey said, "The most important development is not only the increase in bond interest rates, but also the volatility in bonds. This situation is now starting to be reflected in the general asset prices."
Stating that capital expenditures for artificial intelligence may slow down, Boey stated that some companies in the sector may be harmed by this process.
In the USA, the Philadelphia Semiconductor Index also decreased by 2.7 percent on Monday.
BLACKROCK LOWERS THE OUTLOOK ON US SHARES
The research unit of BlackRock, the world's largest asset manager, lowered its outlook on US stocks to "neutral" on Monday.
While the institution cited the volatility that may occur around the investment wave in artificial intelligence infrastructure as the reason for its decision, it expressed a positive opinion on short-term US Treasury bonds.
The International Monetary Fund (IMF) also warned that the effects of a correction in the artificial intelligence sector could be felt on a global scale.
While the IMF acknowledges the contribution of artificial intelligence investments to economic growth, it stated that there is increasing evidence that technological capacity investments and the economic gains from them will not be as large as expected.
5 BILLION DOLLAR PUBLIC OFFERING WAS CANCELED
The change in risk perception was also reflected in the public offering market.
Nvidia-backed data center operator Firmus canceled its planned $5 billion IPO in Australia last week after weakening investor demand.
This development was one of the indicators that investors started to focus on risks rather than growth when transferring capital to the sector.
BORROWING COSTS ARE INCREASING
One of the most important problems in artificial intelligence investments is the ever-rising financing costs.
Tencent Holdings' dollar and Dim Sun bond issuance in Hong Kong was one of the last debt transactions closely watched by the market.
While a return of approximately 1.15 points above the US Treasury bonds is expected for the company's 10-year dollar bonds, the US benchmark bond interest is at 5.2 percent.
Japanese technology investor SoftBank offered investors up to 9.75 percent interest in its $4.5 billion high-yield bond issue last month.
At finance conferences in Singapore, the cost of capital came to the fore as one of the main problems of the sector. Broadcom CEO stated that the biggest constraint to growth is now capital.
'IT IS NOT THE END OF ARTIFICIAL INTELLIGENCE TRADE'
However, there is no prevailing opinion in the markets that artificial intelligence investments have completely ended.
Meta shares rose 3.4 percent on Monday after the company announced its new artificial intelligence model.
Lucerne Asset Management Chief Investment Officer Marc Velan said the sharp sell-off in South Korea reflected investor positions and rising capital costs rather than a fundamental deterioration in AI demand.
"We are entering the next phase of the AI cycle. Markets are now increasingly focusing on revenue-generating capacity and return on invested capital. I wouldn't call this the end of the AI investment theme," Velan said.
Velan stated that the sharp sales in the South Korean market could be an early warning of a more comprehensive sorting out across the industry.
