Concerns over the financial burden of expanding artificial intelligence (AI) infrastructure investments are leading to a decline in wire stocks. As of 10:25 a.m. on the Korea Exchange, LS Eco Energy was trading at 49,300 won, down 9,500 won (16.16%) from the previous trading day. Gaon Cable and Iljin Electric also saw declines of 28,000 won (10.77%) to 232,000 won and 6,600 won (9.85%) to 60,400 won, respectively.
The sharp drop in wire stocks is attributed to fears that the cost of financing necessary for AI infrastructure investments may increase. Newly listed data center infrastructure company Ellice also experienced a maximum drop of 32% during trading.
With significant funds being poured into data center construction, concerns have been raised that rising borrowing costs could restrict future equipment investments. As a result, expectations for expanded AI infrastructure investments, which had previously been reflected in wire stocks, are weakening, leading to profit-taking sales.
Particularly, the sustained high levels of U.S. Treasury yields are raising doubts about the profitability of AI companies that rely on borrowing to expand their equipment investments. The yield on the U.S. 10-year Treasury note was around 5.14% during Asian trading.
Meanwhile, LS Eco Energy reported third-quarter consolidated revenues of 351.5 billion won and an operating profit of 22.2 billion won. Thanks to the AI boom, revenues and operating profits increased by 51% and 50.2%, respectively, compared to the same period last year. However, despite these strong results, the stock price has fallen sharply due to a broader sell-off in the sector.
* This article has been translated by AI.
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