Samsung and SK Hynix slide 10% as chip rout flags Bitcoin risk

South Korea's two biggest chipmakers each plunged more than 10% this week, and crypto traders are watching the selloff as an early warning for Bitcoin.

Samsung Electronics and SK Hynix each plunged more than 10% on Tuesday, dragging the Kospi to a three-month low as crypto traders monitored the selloff for signs of broader risk-off sentiment spilling into Bitcoin.

"SK Hynix delivered strong results, but in today's AI market, strong is no longer enough," Gary Tan, portfolio manager at Allspring Global Investments, said. The chipmaker's operating profit more than sextupled but missed lofty expectations, a gap that has fueled the broader selloff across Asian semiconductor stocks.

The Kospi sank more than 11% on Wednesday, extending its four-session decline to 22% and triggering its eighth circuit breaker of the year. Samsung posted its worst single-day drop in almost two decades. The selloff spread beyond Korea: Taiwan stocks fell 5%, Japan's Nikkei slid 2.6%, and Nasdaq futures dropped 0.7% in Asian trading.

For crypto traders, the chip rout matters because South Korean equity markets have historically correlated with Bitcoin drawdowns during risk-off episodes. A sustained slide in semiconductor stocks — which powered this year's AI-driven rally — could precede a broader unwind of risk assets, including cryptocurrencies, as investors question whether massive AI spending will deliver returns.

The Korea-Hong Kong unwind

Correlation data suggests a trade that shorted Hong Kong tech to fund bets on Korean chipmakers is rapidly reversing. The Kospi has again become negatively correlated with the Hang Seng Tech Index on a rolling 20-day basis, meaning gains in one align with losses in the other. That pattern points to investors selling Korean semiconductor heavyweights while covering shorts in Alibaba and Tencent, according to Bloomberg data.

What crypto traders watch next

The Federal Reserve's policy decision later Wednesday adds another layer of uncertainty. Traders are pricing in a 33% chance of a rate hike, with some analysts warning the market may be underestimating the hawkish shift. Higher rates typically pressure risk assets, including cryptocurrencies, by raising the opportunity cost of holding non-yielding assets.

Earnings from Microsoft and Meta later this week will be a key test of the AI trade. "This round of earnings would need to prove that the huge capital expenditure has paid off, else we may see the market drag further," Sean Teo, sales trader at Saxo in Singapore, said. Teo also warned that investors are growing wary of circular financing, where a handful of companies invest in each other in a closed loop, making organic demand unclear.

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