Asia tech rout resumes as stocks slide on AI valuation fears

ASIA’S tech-heavy markets slumped as sell-offs in sector leaders resumed on mounting concerns over stretched artificial intelligence (AI)-related valuations.

South Korea’s Kospi index fell 3.8 per cent on Friday (Nov 21), with heavyweights Samsung Electronics and SK Hynix bearing the brunt of the selling.

Taiwan’s benchmark Taiex declined 3.6 per cent, the sharpest drop since April. Japan’s Nikkei 225 index, home to many of the country’s top tech names, also slid 2.4 per cent. 

The declines follow a sharp reversal on Wall Street, where a rebound led by Nvidia quickly fizzled and investors fled from risk assets, including cryptocurrencies.

Persistent doubts over whether AI spending will generate sufficient returns continue to spur volatility across the region’s markets. Uncertainty over the US Federal Reserve’s policy path added to investor jitters. 

“With worries mounting that the AI rally has become over-extended, tech names are getting hit,” said Jung In Yun, chief executive officer at Fibonacci Asset Management Global. “This is rather a risk-off rotation, not a fundamental collapse. So depending on what the Fed signals in coming weeks, there’s room for flows to stabilise – or even reverse.”

On Thursday, the S&P 500 sank to its lowest level in more than two months, with Nvidia sliding 3.2 per cent despite its upbeat earnings forecast.

Relief from the US chipmaker’s guidance briefly lifted sentiment, but questions over the durability of the rebound suggested only a temporary reprieve. 

Asia’s leading chip suppliers to Nvidia led the losses in the region. Taiwan Semiconductor Manufacturing Co’s shares fell 4.8 per cent, while Korean peers Samsung Electronics and SK Hynix retreated 6 per cent and 8.8 per cent, respectively, according to Korea Exchange prices. 

AI-related names also were among the biggest losers in Japan, with SoftBank declining 11 per cent. Chip-gear makers Kioxia, Advantest and Ibiden each lost more than 9 per cent.

Negative sentiment was exacerbated by a plunge in US memory and data storage-related stocks – Sandisk fell 20 per cent – after reports that South Korean firms plan to expand chip production. 

“Memory capex is bound to explode next year, but I wasn’t expecting such a big correction,” Amir Anvarzadeh, Japan equity strategist at Asymmetric Advisors, wrote in a note. “This is the segment which we have been taking shelter in” due to climbing Nand and Dram prices.

Fuelled by the global AI boom and supportive domestic policies, South Korea’s equity benchmark had surged over 60 per cent this year, one of the world’s best performers.

Yet, as Asia’s poster child for AI trade – spanning semiconductors, power equipment and even nuclear energy – the index is now taking the sharpest hit. BLOOMBERG