Asian stock rout deepens as AI worries grip markets, with regional indexes sliding sharply on Wednesday after investors flagged concerns over artificial‑intelligence valuations and looming earnings from the sector’s biggest players.
Market melt‑down spreads across the region
South Korea’s Kospi, which had more than tripled over the past year, fell more than 11 percent to its lowest level since early April. The drop followed a 10‑percent slide on Tuesday, extending a steep decline that began earlier in the week.
In Taiwan, the main index slipped 5 percent, while Japan’s Nikkei lost 2.6 percent. The broader MSCI Asia‑Pacific index outside Japan was down over 2.45 percent after a 3.6 percent loss the day before.
Hong Kong’s Hang Seng index bucked the trend, gaining 1.4 percent.
Chipmakers feel the pressure
Shares of SK Hynix dropped 9 percent after the company reported a quarterly operating profit that rose more than sixfold, yet fell short of analysts’ lofty expectations.
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“SK Hynix delivered strong results, but in today’s AI market, strong is no longer enough,” said Gary Tan, portfolio manager at Allspring Global Investments. “Investors were looking for additional catalysts, particularly around long‑term agreements and shareholder returns, to support a memory sector that has become the epicentre of the AI trade,” he added.
Other semiconductor firms have seen similar swings, reflecting the broader sentiment that the AI‑driven rally may be losing steam.
The market’s anxiety is not limited to chip makers. Earnings from the “Magnificent Seven” members Microsoft and Meta, due later in the day, will test whether the AI thesis can survive the current turbulence. After Alphabet and Tesla reported negative cash‑flow figures last week, investors are scrutinizing the returns on massive capital outlays.
“This round of earnings would need to prove that the huge capital expenditure has paid off else we may see the market drag further,” said Sean Teo, sales trader at Saxo in Singapore. He warned that investors are becoming wary of circular financing, where a handful of companies invest in each other, obscuring genuine demand.
From a practical standpoint, the swings mean that companies reliant on AI‑related spending may face tighter financing conditions, potentially slowing expansion plans and affecting employment in tech‑heavy regions.
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Oil, geopolitics, and the Fed add to uncertainty
Oil prices surged after fresh attacks in the Middle East disrupted the fragile calm of the US‑Iran conflict. Brent futures rose more than 3 percent to US$87.19 a barrel, while US West Texas Intermediate crude climbed to US$82.08.
“The latest attack highlights that the two sides remain a long way from resolving the core dispute of passage through the Strait of Hormuz,” said Tony Sycamore, market analyst at IG. Iran’s closure of the waterway followed strikes by the United States and Israel in February, and a brief June agreement to reopen the channel collapsed in early July.
Higher energy prices have placed inflation pressures back in focus ahead of the Federal Reserve’s policy decision, expected later on Wednesday. Traders are pricing a roughly 33 percent chance of a rate hike, despite the Fed’s new “no‑guidance” stance under chair Kevin Warsh.
“We think the market may once again be underestimating the extent of the hawkish shift at the Fed, and that the (for now) moderate increase in energy prices may tip an already finely‑balanced meeting in favour of a hike this week,” said Frank Flight, head of macro strategy at Citadel Securities. He added that a rate increase now appears more likely.
Nasdaq futures fell 0.7 percent in Asian trading hours, while European futures slipped 0.6 percent, indicating that the sell‑off is spreading beyond the region.