Singapore Chip Suppliers Drop as Memory Sector Weakness Hits Asia

Suppliers to US Chipmaker Take Hardest Hit

Singapore semiconductor stocks fell sharply Tuesday as a memory chip downturn spread across Asian markets. Frencken, which supplies Applied Materials, dropped 8.9% by close. UMS, another Applied Materials supplier, declined 8.5%. AEM shares fell 8.5%, while CSE Global retreated 4.9%.

Applied Materials traded down 5.2% during the US morning session, pulled lower by a broader sell-off in semiconductor equipment makers. The decline followed news that a state-backed Chinese company can now mass-produce deep ultraviolet lithography machines, according to The Information. DUV tools form the backbone of chip manufacturing and represent a core revenue stream for ASML, which commands roughly 90% of the global lithography market.

ASML shares fell 5.8% on the report. Japanese lithography equipment makers Nikon and Canon dropped as much as 9.2% and 6.3%, respectively, marking their steepest declines in over two months.

Memory and AI Stocks Retreat

The weakness extended to memory and AI sectors. AMD shares dropped about 7% in Monday US trading, while Micron fell approximately 5%. Nvidia declined around 5% after The Wall Street Journal reported the company could provide roughly $250 billion as a financial backstop for an OpenAI data center project. The arrangement raised investor concerns about circular financing structures reminiscent of the dotcom era.

South Korean chip stocks continued the downturn Tuesday. Samsung Electronics and SK Hynix retreated as much as 9.5% and 10.9%, respectively. Investors appeared to rotate out of AI positions amid growing worries about infrastructure spending risks and intensifying competition from Chinese AI developers.

Moonshot AI recently launched its Kimi K3 model, demonstrating that Chinese AI systems are narrowing the gap with American leaders OpenAI and Anthropic. The Chinese startup's model reportedly outperforms all competitors except Anthropic's Claude Fable 5 and OpenAI's GPT-5.6. The company released model weights and a technical report Monday, making them available for public download.

CXMT Surge Draws Skepticism

The regional tech stock decline contrasted sharply with CXMT's Monday debut. The Chinese memory maker became the country's most valuable company after shares surged 466% in Shanghai trading, surpassing Industrial and Commercial Bank of China, CATL, and Alibaba.

James Ooi, market strategist at Tiger Brokers, noted that CXMT's initial public offering, oversubscribed more than 200 times according to reports, reflects strong investor appetite for China's semiconductor localization efforts.

Some analysts expressed caution about the valuation. Jing Jie Yu, equity analyst at Morningstar, said the closing price of 49 yuan appears overdone and CXMT shares now look considerably overvalued. The Chinese chipmaker remains two generations behind peers and lacks access to crucial high-energy systems, making it increasingly difficult to close the technology gap, Yu added.

Cost Concerns Reshape AI Investment

The competitive landscape is shifting focus from model quality to economic value capture, according to BlackRock analysts. Worldwide spending on AI models and platforms is expected to reach $64 billion in 2026, up 63% from 2025, making cost a key concern for companies deploying the technology.

Chinese models now process roughly 23 trillion tokens weekly, compared with about 12 trillion for US rivals. These trends could erode pricing power for frontier model developers even as AI adoption accelerates, BlackRock noted in a Monday analysis. The asset manager prefers AI infrastructure investments over the increasingly competitive model layer.

Companies have stronger incentives to contain costs through model routing and lower-cost alternatives as enterprise AI bills rise. Chelsey Tam, senior equity analyst at Morningstar, said Chinese models will struggle to surpass US peers in advancement unless the compute gap mostly closes, assuming no architectural breakthrough occurs.

Morningstar analyst Brian Colello maintained his $280 target price on Nvidia, viewing the stock as undervalued despite near-term volatility. Given the high likelihood of strong AI capital expenditures across multiple time horizons, Nvidia's growth prospects appear underrated, Colello said Monday.

The Singapore tech sell-off reflects broader uncertainty around semiconductor supply chain dynamics, AI infrastructure financing, and the pace of Chinese technology advancement. Regional chip stocks remain sensitive to shifts in US equipment maker sentiment and memory market conditions.