AI Stock Selloff Tests Leveraged Investors
A technology selloff has accelerated, pressuring heavily margined positions concentrated in AI-related shares. The commentary notes record margin borrowing in the U.S. and South Korea, and argues that forced selling rather than fundamentals is driving the decline. Taiwan Semiconductor reported strong revenue and profit growth, but its shares still fell, reflecting broader concerns about data-center spending and financing costs.
Recent pressure in AI-linked equities has been amplified by record margin debt. U.S. margin borrowing rose 40% over the past year, and South Korea also saw record margin levels; the KOSPI, where Samsung is 27% of the index, fell 7.5% overnight after a 166% trough-to-peak range.
Taiwan Semiconductor posted 41% year-over-year revenue growth, 55% diluted EPS growth, a 51% net margin, and projected a 58% next-quarter revenue rise, yet its shares dropped 5%. With 2027 EPS estimated at $22, the forward P/E was below 20. The commentary attributes the drop to forced selling tied to margin requirements rather than fundamentals.
Retail and institutional investors using leverage may face margin calls, forced sales, and steeper losses if AI-linked shares keep falling. Employees and suppliers tied to data-center and chip spending could see hiring or investment plans slow if financing costs rise. Pension funds and ordinary savers with broad market exposure may feel indirect effects through weaker tech valuations, though diversified portfolios could cushion the blow. The episode may also prompt greater scrutiny of margin risk and speculative concentration.