(Bloomberg) -- Shares of SK Hynix Inc. plunged, leading peers lower, after Morgan Stanley cut its rating on the Korean memory chipmaker two notches citing its fading pricing power.

The stock dropped as much as 11% to the lowest level since Feb. 8. Among other Seoul-listed semiconductor shares, Hanmi Semiconductor Co. fell as much as 8.2% and Samsung Electronics Co. declined 3.4%.

Morgan Stanley downgraded SK Hynix to underweight from overweight and slashed its price target to 120,000 won from 260,000 won. The brokerage said the stock is now its least preferred among global memory makers.

“We prefer moving up to quality in Samsung and value-oriented end markets,” analysts Shawn Kim and Duan Liu wrote in a note. “Memory conditions are beginning to deteriorate. It will get tougher for revenue growth and margins from here as we move past late-cycle conditions.”

SK Hynix shares surged to a 24-year high earlier this year amid excitement over its supply deal with artificial intelligence leader Nvidia Corp. Despite dropping in the past couple of months the stock is still up more than 2% on the year compared with a loss of 21% for Samsung.

Korean stocks have been hit particularly hard by the global tech selloff on concerns over the realization of AI profits. Thursday’s decline comes after a three-day Korean holiday during which US peers extended losses and analysts warned of weak demand for Apple Inc.’s iPhone 16.

Amid the recent AI hype, the market underestimated the impact of excess inventory and “overshipping” on demand for memory chips despite continued high expectations for AI and enterprise server related products, according to Morgan Stanley. 

“Pricing conditions are showing the first signs of deteriorating in two years with contract prices settling well below producers’ quotations,” the analysts wrote. “Put simply: ‘business is not so good,’ according to some leading sellers of memory.”

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