Semiconductors

Whether AI demand is real is a question the market has already answered, and it did not need to wait for SK Hynix’s results. What broke in Seoul on 13 July was not a verdict on that proposition. It was a positioning accident. The Korea Composite Stock Price Index (KOSPI) closed that Monday down 8.95% at 6,806.93, having opened at 7,412 and touched 6,783. At 1:28pm the Korea Exchange tripped its circuit breaker for the seventh time this year and the thirteenth in its history. SK Hynix fell more than 15% to ₩1.845m; Samsung Electronics lost 10.7% to ₩254,000. The flow split cleanly. Foreign and institutional accounts sold a combined ₩3.9tn (about $2.6bn); retail bought ₩3.88tn, almost the mirror image. Individuals were averaging down. ...

When DeepSeek released its low-cost large language model in January 2025, semiconductor shares fell. The logic was simple. If a model can be built cheaply, the expensive GPUs matter less; efficiency rises, so demand falls. That logic has, so far, been wrong. The unit price of inference has dropped by nine-tenths since 2023. Yet the tokens consumed have not fallen but exploded. On Bain & Company’s reckoning, the price per token halved between December 2024 and December 2025 while tokens consumed grew 4.5 times over the same period. Microsoft’s chief executive, Satya Nadella, greeted DeepSeek’s release with the line “Jevons paradox strikes again”. The nineteenth-century economist William Stanley Jevons found that as the steam engine grew more efficient, coal consumption rose rather than fell. A resource that gets cheaper is not used less; it opens new uses and its total climbs. ...

On 17 July the Nikkei 225 closed at 64,141, down 2,694 points on the day. That is a fall of 4.03%. As a one-day drop it ranks fifth on record; as a week it was the largest ever, at 4,416 points. Semiconductors and the wider AI complex led the way down: Kioxia Holdings fell 16.1%, Ibiden 9.9%, Tokyo Electron 8.2% and Advantest 7.2%. The headlines reached for a warning about the AI growth story. Line the day’s moves up in a row, though, and the story that was supposedly under threat is nowhere to be seen. What shows up is duller than that. ...

In the second quarter of 2026 Taiwan Semiconductor Manufacturing Company spent $15.7bn on plant and equipment. Add the first quarter and the half-year total reaches $26.8bn. On the same day it reported those figures, the company raised its full-year capital budget to a range of $60bn-$64bn, up from the $52bn-$56bn it had guided in January. Management gave two reasons: demand that keeps climbing, and tools now bought at inflation-era prices. Free cash flow fell by NT$60.8bn over the quarter, which the company attributed to capital spending outrunning the growth in operating cash. The quarterly report sets it all out. ...

Japan’s record ¥122.3 trillion budget passed on 7 April. Domestic media are busy picking ‘Takaichi stocks’ in defence and semiconductors. But the financial statements of the supposed beneficiaries tell a different story – and the budget’s largest single outflow goes not to growth investment but to debt service, enriching the banks and life insurers who underwrite it.