San Francisco Frontiers - Asian Technology Shares Slide as Investors Reassess AI Boom

Technology companies led losses across Asian markets as investors questioned high AI valuations despite a rebound on Wall Street.

Tech firms led heavy losses across Asian markets on Tuesday as investors shrugged off a rebound on Wall Street amid growing worries about the artificial intelligence (AI) investment boom ahead of key earnings releases. Seoul and Tokyo again bore the brunt of the selling, as chip giants SK hynix, Samsung and Kioxia took another beating in a sharp exit from a sector that saw blistering gains in the first half of the year.

Since record highs in June, traders have been questioning high valuations and when, if ever, companies will see returns on the huge sums they have spent in the AI race. Concerns over some firms’ debt levels have also grown as interest rates rise around the world.

South Korea’s Kospi sank over four percent at one point in early trade, with SK hynix and Samsung down over three percent and one percent respectively. The Nikkei 225 in Tokyo fell as Kioxia lost almost two percent and tech investor SoftBank plunged over five percent. Taiwan’s TSMC also fell, though the Taiex edged higher. There were also losses in Hong Kong, Shanghai, Sydney, Singapore, Wellington and Manila.

The selling came despite a positive day on Wall Street, where gains in Amazon, Microsoft and Nvidia pushed the Nasdaq solidly higher and the Philadelphia Semiconductor Index rose 1.6 percent, ending eight days of losses, as reported by Bloomberg. Attention is now on earnings, with Meta and Tesla reporting this week, but analysts stated investors expect ever better results to justify valuations.

“The market is no longer trading the headline numbers in isolation,” stated Stephen Innes at SPI Asset Management. “It is trading the gap between what companies earn today and what they still have to spend to keep the AI machine humming tomorrow.” Pepperstone’s Chris Weston stated the market needed “confidence that the enormous capital being deployed will generate returns above the cost of funding it”.

Oil prices edged up, with Brent around $110 a barrel and West Texas Intermediate near $104, on worries over Iranian attacks in the Strait of Hormuz. Iran’s First Vice President Mohammad Reza Aref stated Tehran had to impose its control over the waterway, through which a fifth of the world’s oil and gas usually passes, to maintain its security, state news agency IRNA reported. He stated friendly nations could enjoy safe passage, but that the United States “is now the cause of the current situation and must pay the price”. His remarks offset signs that crude shipments were close to pre-war levels.

On currency markets, the euro held steady against the dollar but remained under pressure as violent cost-of-living protests in France and Italy raised concerns about their economies and pushed up government bond yields. Stock markets in both countries fell over one percent on Monday. — AFP

Key figures at around 0230 GMT:

Tokyo - Nikkei 225: DOWN 0.6 percent at 64,512.35 (break)Seoul - Kospi: DOWN 2.8 percent at 5,607.95Hong Kong - Hang Seng: DOWN 1.1 percent at 23,926.81Shanghai - Composite: DOWN 0.2 percent at 3,722.56West Texas Intermediate: UP 0.2 percent at $103.82 per barrelBrent North Sea crude: UP 0.2 percent at $109.74 per barrelEuro/dollar: UP at $1.1218 from $1.1211 on MondayDollar/yen: UP at 158.58 yen from 158.55 yenNew York - Dow: DOWN 0.1 percent at 51,966.03 (close)London - FTSE 100: DOWN 1.1 percent at 10,764.69 (close)

N.Wilson--SFF