TSMC slides 5%, ASML 7% as chip selloff deepens

Semiconductor stocks are selling off globally as investors question whether the AI infrastructure buildout has outpaced fundamentals.

TSMC and ASML shares tumbled in pre-market trading Tuesday, with the chipmaker falling 5% and the lithography giant dropping 7%, as a broad semiconductor selloff swept across Asia and the US.

"The market is repricing AI exposure after an extraordinary run," said Rachel Kim, semiconductor analyst at Edgen. "When the two most important companies in the chip supply chain fall simultaneously, it signals a coordinated de-risking event."

The selloff extended beyond the two bellwethers. South Korea's KOSPI plunged as much as 4.6%, with Samsung Electronics and SK Hynix both sliding more than 5%. Foreign investors sold more than 2 trillion won ($1.3 billion) of KOSPI shares in the morning session. In the US, the Nasdaq Composite fell 1.32% to 26,166.60, while the S&P 500 slipped 0.37% to 7,472.79. KLA Corporation, the process control equipment maker, has surged 77% over the past three months and now trades 24% above Wall Street's consensus price target of $193 — at 72 times trailing earnings, with free cash flow down 37% year over year.

The unwind reflects mounting concern that the AI-driven semiconductor rally has become overstretched. Taiwan's margin debt has swelled 160% over 12 months to near the all-time high set before the 2000 dot-com crash, while BTIG warned the semiconductor-to-Nasdaq ratio surged 46% in 12 weeks — a velocity seen only at major market tops. KLA insiders have logged 19 stock sales and zero purchases over the past year, with CEO Rick Wallace selling at $2,213.37 per share pre-split, more than double GuruFocus's fair value estimate of roughly $997.

Taiwan and Korea Expose Concentration Risk

Taiwan's equity market has more than doubled over the past year, overtaking the UK, Canada and India to become the world's fifth largest. But the rally has been powered almost entirely by TSMC and its chipmaking peers, which produce 90% of the world's most advanced semiconductors. Margin debt has surged 160% over 12 months to near the all-time high set just before the 2000 crash — dwarfing the 50% rise in the final year of the dot-com bubble. Stock-trade defaults more than doubled in June to over NT$2 billion ($62 million), the highest since data began in 2019.

In South Korea, the KOSPI has now fallen 9% in just two sessions from a record high, as leveraged ETF volatility amplified the selloff. Regulators are weighing stabilization steps to limit fallout from sharp swings in products tied to Samsung and SK Hynix, having earlier expressed regret at allowing the instruments.

The rotation is not limited to Asia. US equities drew a record $119.2 billion in the week to June 17, with tech absorbing a record $19.2 billion, according to Bank of America. But JPMorgan flagged hedge fund gross leverage at the 100th percentile, and Goldman Sachs' prime desk noted funds turned modest net sellers after four straight weeks of buying.

For investors, the question is whether this is a correction within a secular bull market or the beginning of a deeper unwind. TSMC trades at roughly 22 times forward earnings, below its five-year average, but the broader semiconductor supply chain — equipment makers like ASML and KLA — still carries elevated multiples that assume uninterrupted AI spending growth. If the selloff deepens, the Philadelphia Semiconductor Index could test its 200-day moving average, a level not breached since October. The next catalyst comes in July, when TSMC reports second-quarter earnings and updates its 2026 capital expenditure outlook.

This article is for informational purposes only and does not constitute investment advice.