South Korea's AI bubble just crashed

All right, there's a lot going on right now, and I want to keep you informed.These are the headlines.AI stock sell -off deepens as investors dump chip makers.And this is the question we're having, basically, market crash here in Korea.That's where I'm at.How bad will this get in the USA?

That's what we're all watching, like, literally right now, live.Stock market today.Chip stocks under pressure as AI worries push investors to other sectors.Remember, we're still talking about circular financing and such.And then you got chip route deepens on circular funding.China competition fears.

OK, so let's take a look at what people are saying.And it's actually quite whacked out.You got to see it for yourself.

Very popular song, Tracy Chapman, similar name.This market is moving quicker than a fast car, getting these triggers.Another day.So I'm losing count now of the number of days this month that we've seen either the KOSDAQ or the KOSPI just get halted because of just how volatile things have been.But yes, that's where we are currently.So we'll revisit, of course, what goes on.

So you can actually see it there.It says KOSPI trading halted for 20 minutes.So that's the Korean market.Basically, the selloff was like intense, started it opening and just kept selling off.So there's that.And this is what a market crash looks like where you just see like these things going down crazy.

It's been multiple days this month where they'll freeze trading.for a couple of minutes and then resume.I'll let you get it right there.They got the chart up there.And long story short, if China comes in cheaper, more efficient, all these things, it destroys the business model of multiple countries and multiple companies in multiple countries, I should say.

Big names in regions such as Samsung, Tokyo Electron and TSMC also deeply in the red.Now, trading on SouthKorea's benchmark, KOSPI, was paused temporarily by sliding 8%.Shares of SK Hynix have plunged 45 % from their all -time high in June, as concerns about overcrowding, CapEx, and competition set in.But look, here's the thing.Here's the thing.

I've just said to you, fell 45 % from June.those levels as well.But the fact of the matter is, the ride is two way.Ride is two way.Look, I want to show you something.This is the Kospi year to date.

Have a look at this.What do you see?Yeah, you see a chart that goes up and then goes down.And it's still up 43 % year to date.

So if you are an owner, and people are kind of laughing about this, because it's just, It's trading like crypto.And it's been like this all year, actually.And it's interesting to see the international press now picking up what's going on in the Korean market.

They call it South Korea for a reason today.headed south substantially.We're down 10 % on the COSPI index, some of the big moves we're seeing in that market, down double digits.SK Hynix, Samsung Electronics, some of the other big plays, SK Electromechanics I think is coming up on your screens as well.Can we get that up guys if we can, just to give you a sense of some of the big movers there.Samsung Electromechanics rather, my mistake, 17%.

SK Square, down about 15%.

You get the idea.And you have to remember this is in a day.That's why it's crazy.Now, I want to show you some stuff too.This is what local Koreans here in Korea are sharing on social media.It's actually pretty funny when you see this stuff.

So basically, this is like, you know, a guy asking his friend, hey, what's going on?And the sheet's all, you know, wet from crying.And they show the headlines of the market and stuff like that.People have a sense of humor about this stuff.But yeah, people are losing.It's true.

But our, our,our markets have been like like crypto effectively.Here's another one.Someone's posting that, you know, the market's down 10 percent.Some stocks are down 12 percent, you know, et cetera.And that's his lunch for the day.

All you can afford is rice and dried seaweed.It's funny for us here in Korea.

You get the joke like like you're winning, you're winning, you're cheering.

Ten seconds later, you're losing.Here's another one, this is more of a joke where you're trying to do CPR on the stock market, right?So first you're trying to give it mouth -to -mouth to get the stock to go up, now you're giving the CPR for it, it's a joke.But essentially, so many people are in the markets right now, everyone's watching it, so they're putting all these sort of things on here.Then you go to the Cosby building and start praying for it to go up, again, another thing.Or you have people saying, you know, I bought Samsung at $3 .57, and I think it's now trading like at $2 something.

So there's that.Just want to give you a little flavor of what's going on.This is then our local news.Actually, let me show it here.

Cospi and Costa.

Yeah, it's funny to see what it looks like.So for us, blue is down, red is up, blue is down.So it's different than US market where it's green is up, red is down.So basically everything's blue.Another way to think about it is sometimes people ask me, red is good luck in Asia.So red is up, blue is down.

You can think about it as being like hot and cold kind of thing.It's another way, easier way to think about it.But that's sort of how our news looks like.Here's more.And if you heard it, they said it a couple of times, circuit breaker, right?So that's sort of when the markets crash too far and they freeze trading.

And again, it's all blue on the screen.So just, you know, transport this to the American market.Just imagine you turn on the TV and the people at the market are like, dude, everything's red.Everything's down like, you know, double digits.Like you'd be kind of freaking out, too.That's why it is true, right?

It's true.People are losing.It's totally true.You also have to get a sense of humor about it, too, because the market's been up like ludicrous amounts.It's been unbelievable.I mean, that's been on the news also as well as like, how high is this thing going to go?

It's kind of like, is Bitcoin going to hit $100 ,000 or is Dogecoin going to hit a dollar?There's a gambling aspect to it also.There's a lot of leverage in the market as well.So they're talking about sidecars and circuit breaker.If I remember correctly, I think sidecar is like a five -minute halt, circuit breaker is like a 20 -minute halt.I think that's how that works.

And then they do it multiple times this month.It's been really, really volatile.

I want to address South Korea, just because we went through this very dramatic a parabolic move to the upside and downside and really the level of volatility what do you think that does to the market say psyche looking at south korea sure it's a great ai story picks and shovels story but do you think the global market and she's laughing too it's hard to explain i mean it Again, to us, it feels like Dogecoin, crypto, like how crazy it's going.

If you guys ever been in the market in these sort of volatile things where you wake up one day and it's like, wait, I am like 20 % richer.Like it doesn't feel real because it's so ludicrous.And a lot of it's based on leverage.It's just so easy to borrow money these days, which I'm sure you guys understand there's all sorts of repercussions with that.And so the couple of things that people are talking about, okay, so what's going on in China?They got this new company, they got this new tech.

How far behind, you know, be it Korea or the American companies or Taiwan?Are they?Are they going to leapfrog in a hurry?took give you huge bonuses to come over, right?And then, you know, pick your brain effectively.And then, you know, you get these crazy leapfrogs.

He's fueling this AI angst across Asia.Now, China correspondent Min Min Lo joins us from Hong Kong, along with Asia equities reporter Winnie Hsu.So Min Min, let's start with you.What do we know about the scale at which China can produce DUV machines?Because this has been one of the catalysts that's seen the sell off today.

That's right.And this is according to the information reporting and according to their sources, China is planning to produce five of these machines this year and 20 next year.This is a particular company that is based in Shanghai.It has not been named yet.20 next year.monopolies out there in this sector and ASML has been prevented from selling its most advanced machines to China.

Now, mind you, these DUV machines are not top of the range.The most advanced machines that ASML can sell are the EUV, extreme ultraviolet lithography machines.DUV is deep ultraviolet lithography machine.So it's slightly less advanced, but still.

But that's the key though to where if China can develop really good AI chatbots and agents and all that, this, you know, AI technology, and they're doing it using equipments and machines that produce slightly slower, if you want to say inferior, whatever you want to say it, but they've learned to be more efficient, right?And then that really ruptures the other markets around the world.So that's why everyone's watching this thing.And it's really fascinating to hear the stuff of like, hey, they got, what was it, eight machines, 20 more machines coming.And if you know anything about China, they don't necessarily have to source from other countries.They said some of the stuff did come from Japan, but the USA is out of the loop on this stuff.

And this is why, like, when you see this panic in Korea, because remember, Korea is affected by this stuff, will it then spread to the USA?I think it totally is going to.The Americans are going to try to downplay this and say, oh, no, we got the best market in the world.We have Trumpers.He's our best president.We got Elon Musk.

Oh, my God, it's awesome.He's going to have space dinners.some data centers in space, but that's for you to determine what you think.

All right, let's listen to more here.Weighing on our confidence around chip stocks, Neil.

I think, Anna, the issue on Chinese competition is concerning to many players in the market because, of course, we've had lots of IP restrictions on technology going into China.And yet, somehow, China seems to have gone up the technology curve substantially in terms of the ability to produce chips, the ability to create AI frontier models, and potentially now even into chip equipment, which, of course, ASML is really the monopoly.both what they call deep ultraviolet, DUV, and EUV, extreme ultraviolet machine.

This is really taking a lot of people by surprise.And again, China's breaking up monopolies here.This is going to be an investor person saying, well, let's see what they say how they evaluate the situation.

How concerned are you then about the tech dynamics?Do we set aside what we see on the Kospi and say that's a very different market, it's very volatile, it's very influenced by just two companies and they have a fairly volatile track record recently.Do we set that aside as being different or are you overall concerned about what we see in the tech landscape?

So there are idiosyncratic factors that are driving the Korean stock market in particular, most notably the ample leverage in the system.And yes, we are seeing a high degree of correlation with the U .S.Nasdaq.But I think at this juncture, we're not overly concerned about drawdowns in the tech space.And that's largely because of the earnings backdrop does remain exceptionally robust.

There's questions around the return on investment from a lot of this CapEx spend, but we're not yet seeing signs of cracks there.And even if we lookat margin expansion, really, it's being driven by tech.

So, okay.So I think the English term in America, you guys would say cap and is that, is that the right word or front end?Is that the right word?So, uh, I think she's totally just making crap up.Um, but point being though, is they gotta be concerned.They got to be concerned about circular financing.

You got to be concerned.Is China going to be a major challenge?You also got to be concerned is, is there no return on investment on all this cash burn on all these companies?She was talking about how margins are greater or whatever.If you guys pay attention to the Tesla earnings, right, this is why I crack this stuff.It was not great.

I mean, their margins are absolutely getting crushed.They got nothing new on the horizon, and then they're expected to spend a bunch of money on AI.And then Google, I think it was the first time since 2004 that they went cash flow negative.That's Google.Google's like supposed to be the cash printing machine.And so that's actually really concerning.

You have basically major bubbles in Korea and the USA.The Korean bubble is fueled by the Americans and all this is based on leverage and debt.And then you got China coming in more efficient and cheaper.And they're just like coming out of the blue.I mean, they're saying, hey, we got these reports of like these machines being built.I guess you could argue it's like the kind of sputnik kind of moment.

Like, hey, what's that satellite doing overhead?So that's what's going on.We're going to see how this plays out.but again, we're crashing here in Korea, and will it spread to the US?That's my thoughts, I'd like to hear yours, and I'll catch you all in the next video.