San Francisco Frontiers - Tokyo, Taipei lead heavy losses as Asian markets suffer fresh tech rout

The AI boom has sent technology valuations soaring to record levels as traders looked to get a slice of the next big thing while firms splashed out enormous amounts of money in investment.

But questions have been raised in recent months about whether valuations have gone too far and when companies will actually see any returns.

Worries about the AI trade have hammered the value of chip firms, with the Philadelphia Semiconductor Index losing about 19 percent from a June peak, according to Bloomberg.

Asian markets have been hammered, with Seoul's Kospi bearing the brunt of the selling, having more than doubled in the first six months of the year before losing about a third of its value since hitting a record in June.

But with South Korea enjoying a holiday on Friday, Tokyo and Taipei -- which are also heavily weighted toward tech -- were at the forefront of the selling.

Japan's Nikkei sank six percent with Advantest, Tokyo Electron and tech investment titan SoftBank losing more than 10 percent.

Chipmaker Kioxia collapsed 16 percent, meaning it has lost more than half its value since hitting a record high and becoming the country's biggest firm by market capitalisation last month.

Taiwan's Taiex also shed more than five percent as chipmaker TSMC retreated around the same amount a day after announcing record second-quarter profit and that it would invest a further $100 billion in the US state of Arizona.

There were also steep losses in Hong Kong, Shanghai, Singapore, Sydney and Bangkok, though Manila and Mumbai rose.

"It looks like the rally in artificial intelligence-related stocks appears to be losing some momentum after months of almost uninterrupted gains," said Fawad Razaqzada, a market analyst at Forex.com.

"Given the pace of the prior advance, some consolidation was always likely. But there are some investors who are increasingly questioning whether the enormous sums being committed to AI infrastructure can generate sufficient returns within a reasonable timeframe."

However, he added that the selling "could simply reflect a period of portfolio rotation".

"Some investors may prefer to lock in profits from richly valued semiconductor names and reallocate capital towards sectors offering more attractive valuations and steadier earnings visibility," he wrote.

The dour mood in Asia followed losses in New York, where sharp falls in Nvidia and Amazon helped drag the Nasdaq down more than one percent.

Netflix plunged more than nine percent in after-hours trade as it warned of a second quarter of slowing sales growth.

"The AI trade keeps learning the same lesson the hard way: when a stock goes vertical, it does not need bad news to come down. It just needs buyers to stop paying any price," said SPI Asset Management's Stephen Innes.

Oil prices jumped one percent as the US and Iran continued to exchange strikes in a flare-up that has seen traffic through the key Strait of Hormuz fall back to a trickle.

The renewed hostilities have fanned fears of a return to war that could send crude prices back higher, putting fresh pressure on inflation and eventually forcing central banks to hike interest rates.

- Key figures around 0500 GMT -

Tokyo - Nikkei 225: DOWN 6.0 percent at 62,809.07

Hong Kong - Hang Seng Index: DOWN 2.0 percent at 24,514.29

Shanghai - Composite: DOWN 1.6 percent at 3,818.59

West Texas Intermediate: UP 1.2 percent at $79.88 a barrel

Brent North Sea Crude: UP 1.0 percent at $85.06 a barrel

Euro/dollar: UP at $1.1440 from $1.1436 on Thursday

Pound/dollar: DOWN at $1.3460 from $1.3468

Dollar/yen: DOWN at 162.41 yen from 162.42 yen

Euro/pound: UP at 84.97 pence from 84.91 pence

New York - Dow: DOWN 0.2 percent at 52,552.97 (close)

London - FTSE 100: UP 0.5 percent at 10,572.24 (close)

G.Allen--SFF