Tokyo and Seoul are bearing the brunt of a fierce global tech rout. Doubts about the real-world returns from artificial intelligence spending are rattling investors, while fresh hostilities in the Middle East are sending oil prices climbing and nerves fraying across Asian trading floors.
A sharp selloff hits Asia’s tech-heavy markets
Tokyo’s benchmark Nikkei index closed down 2.79% at 66,835.56 points, while Seoul’s Kospi index plunged 6.37% to 6,820.60 points. The scale of the losses underlines how exposed both markets have become to the AI-linked technology trade that powered so much of their recent gains. The South Korean exchange, dominated by technology-linked names, has suffered particularly hard from the sudden reversal in market sentiment. According to AFP, the selloff reflects growing unease among investors who once embraced the AI boom without question but are now demanding clearer proof of returns. The central question gripping markets is when firms will see returns on the trillions of dollars invested in the AI sector, and whether valuations have run ahead of themselves. That anxiety is not easing quickly, and traders are adjusting their positions accordingly.
Chip giants take the hardest blows
Semiconductor stocks collapsed in unison across both exchanges, with Seoul’s memory chip champions Samsung Electronics and SK Hynix each plunging roughly 9% and 12% respectively in late trading. The losses carry a bitter irony. Samsung Electronics had announced a multiplication of its operating profit by 19 on a year-on-year basis, a result better than analysts had expected, driven by booming demand for AI-linked chips. That strong result still failed to reassure investors, who kept their eyes fixed on forward-looking prospects and feared a slowdown in the quarters ahead. In Tokyo, the damage was similarly broad. SoftBank Group, Renesas, Tokyo Electron, and Advantest all traded lower as the selloff spread across Japan’s technology sector. One analyst told AFP that for South Korea, the sharp downward move shows “semiconductor stocks having risen too far, too fast, prompting aggressive selling by both foreign investors and domestic institutions.”
Wall Street’s AI wobble reaches across the Pacific
The Asian declines did not emerge in isolation. Pressure had been building on Wall Street in previous sessions, where major technology names suffered significant losses that set the tone for Asian trading. Meta fell 2.32%, Microsoft dropped 3.20%, and SpaceX collapsed 16.40% in the prior session. The SpaceX drop followed its announcement that it planned to borrow up to 20 billion dollars, reminding markets that its recent public listing had not been sufficient to meet the company’s financing needs. That announcement revived recurring fears about sector valuations and the future profitability of the massive investments being made to develop artificial intelligence. Alphabet also sank 5.02%, hit further by concerns about the departure of two of its key AI specialists to rival firms. These cascading losses created a difficult backdrop for Asian open, giving sellers in Tokyo and Seoul additional cover to act aggressively.
Middle East tensions add an oil shock to market anxiety
The renewed tensions in the Middle East and the rebound in oil prices have compounded the pressure on Asian bourses, which were already weighed down by concerns over AI-linked technology valuations. Markets remain suspended on the renewed tensions around the strategically vital Strait of Hormuz, through which one fifth of the world’s oil and liquefied natural gas once flowed before the conflict disrupted traffic. As one analyst noted, “while AI-related questions and the tech sector have dictated market moves in recent weeks, investors are now forced to refocus on geopolitical tensions.” Investors in Tokyo also kept a close eye on the Japanese yen, which hovered near a 40-year low against the US dollar, a level that makes imports, including oil, considerably more expensive for Japan. The combination of a weakening currency and rising energy costs creates a compounding burden for Japanese corporations already navigating weaker equity prices.
A double threat that could persist
The confluence of AI skepticism and Middle East instability is proving to be a stubborn combination for Asian markets to shake off. Analysts warn that geopolitical risk “should dominate market morale, especially if we see a fresh escalation in tensions in coming sessions.” Japan’s and South Korea’s markets had soared as many of their major technology firms were lifted by demand for computer chips and other high-value components used in artificial intelligence, but recent worries over AI valuations have trimmed some of those gains. The road ahead may offer little immediate relief. Alphabet, Amazon, Meta, and Microsoft have said they would set aside more than 725 billion dollars for the AI industry in the current year alone, a figure that investors are scrutinizing with growing impatience for evidence of proportionate financial returns. Until that evidence appears, Tokyo stocks and their Seoul counterparts are likely to remain a barometer of the global market’s shifting relationship with the AI investment story.
Based on reporting by AFP via TradingView (tradingview.com)
