Why is Samsung Electronics stock plunging today?

Samsung Electronics' stock plummeted by 7.4% to ₩232,000 on Tuesday due to a direct competitive threat from China and a widening loss of investor confidence in chipmaking stocks. The main culprit was ChangXin Memory Technologies (CXMT), a Chinese firm that announced plans to launch a next-generation server memory module by year-end.

This module is expected to utilize a more advanced cell architecture, potentially undermining Samsung's pricing advantage and profit margins. This news came shortly after Samsung reported a preliminary third-quarter operating profit of around 107.4 trillion won, a remarkable year-on-year increase. However, the market's reaction was far from positive, with investors seemingly pricing in a scenario where Chinese competition could erode Samsung's margins well before the earnings peak.

Morgan Stanley's memory chip team had previously warned that semiconductor stocks tend to underperform four to eight months before actual earnings reach their peak, which has further fueled selling pressure. The completion of Samsung's ₩15 trillion share buyback program, executed at prices significantly above the current market level, also contributed to the price support.

Additionally, foreign investors have been withdrawing from Korean equities at an unprecedented rate, with net selling on the main board reaching ₩1.81 trillion in today's trading session alone. The broader Korean market has been experiencing a steep decline, with the KOSPI falling over 6% intraday and falling below the psychologically significant 6,000-point level for the sixth consecutive day, prompting the activation of a sell-sidecar circuit breaker.

SK Hynix, Samsung's sector peer, also experienced a sharp decline following the same CXMT news. U.S. memory rival Micron Technology also retreated overnight. The anticipation of Q3 earnings from chipmaking giants ASML and TSMC, due to be announced this week, added to the pressure on broader chip stocks.