Global chip stocks sold off after China's CXMT claimed a denser memory chip design, with Korean and US memory names falling sharply.

Global chip stocks sold off Tuesday after China's ChangXin Memory Technologies (CXMT) announced progress on a chip architecture designed to pack more data into a smaller space, intensifying concerns about competition in the memory market.

SK Hynix shares tumbled more than 10% in Seoul, while Samsung Electronics dropped 7.4%. Both stocks touched their weakest levels since August, according to CNBC. South Korea's benchmark Kospi index fell 5.5%. Micron Technology was down around 3% in U.S. premarket trading, and shares of SanDisk, Seagate, and Western Digital were each about 3% lower.

In Japan, SoftBank Group sank 8.5%, chipmaking equipment supplier Tokyo Electron fell 7.2%, and semiconductor testing equipment maker Advantest declined 2.9%. The Nikkei 225 dropped 1.8%. European chip stocks also fell, with ASML down 3.3% and STMicroelectronics and Infineon each down 5%.

CXMT, China's leading domestic memory chipmaker and a rival to Micron, SK Hynix, and Samsung, announced over the weekend that it intends to launch a new server memory product before the end of 2026. The so-called 4F square design places each memory cell within an area equal to four times the square of F, the minimum line width of a semiconductor, allowing more cells to fit on a single chip. Most analysts consider CXMT to be behind the U.S. and South Korean memory leaders, so any progress from the Chinese firm could heighten competitive pressure in the market.

Phillip Wool, chief market strategist at Rayliant Global Advisors, described the CXMT announcement as a meaningful moment for China's chip industry but argued that the scale of Tuesday's sell-off was out of proportion to the actual near-term threat. He pointed out that CXMT has not proven it can manufacture at volume and still holds a fraction of the market share commanded by Samsung Electronics and SK Hynix. "More importantly, we're not even talking about HBM here, and the Korean chipmakers are still unquestionably dominating that space, with very little threat at all from the likes of CXMT or anyone else for the foreseeable future," Wool told CNBC.

Vey-Sern Ling, senior equity advisor at UBP, told CNBC that investors are "looking for excuses to take profit on AI-related stocks that have outperformed this year, especially memory stocks." She added that Chinese producers still have significant ground to cover in advanced segments such as high-bandwidth memory.

Tuesday's declines followed a rough Monday session in which Micron shed roughly 3.9% and the Nasdaq Composite closed down 0.44%. CXMT stock closed 2.8% lower in Shanghai on Tuesday.