Tech Rout Spreads to Asia; KOSPI Plunges 10%, Nikkei Down Over 3%

A tech rout spreading from Wall Street saw Asian stocks close lower, with Korea's KOSPI plummeting 10% and Japan's Nikkei down 3.5%. Korean chip giants SK Hynix and Samsung fell over 12% amid concerns over lofty AI valuations.

Asian Markets Plunge on Tech Rout

Stocks in Asia closed lower as the tech rout spread from Wall Street with the Korean index KOSPI closing down 10 per cent and Japan's Nikkei ending the trading session on Tuesday down nearly 3.5 per cent.

Korean semiconductor heavyweights SK Hynix and Samsung fell more than 12 per cent on Tuesday as investors come to terms with lofty AI valuations and the rising costs associated with its deployment. Memory chips have become costly as their demand has picked up exponentially following the AI boom.

US and European Stocks Follow Suit

Wall Street's marquee tech names, including Alphabet, Meta, Amazon and Microsoft, fell on Monday as the investor sentiment remained cautious with a hawkish Federal Reserve stance raising the likelihood of rate hikes this year. Elon Musk-led SpaceX was down 16 per cent on Monday, taking the rocket-to-AI company's valuation down to USD2 trillion. The stock has lost momentum in the last few trading sessions after a blockbuster debut. SpaceX also announced its maiden bond offering, planning to raise funds to be used for bridge financing and financing its massive AI ambitions.

The European stocks were also lower on Tuesday, with the Stoxx 600 declining more than 1 per cent as the tech rout spread to the European indices. European chipmakers Infineon and STMicroelectronics were down 5.7 per cent and 7.5 per cent, respectively. Another heavyweight stock, Dutch Chip equipment maker ASML, was down more than 5 per cent.

AI Costs and Hawkish Fed Add Pressure

The massive rally in AI-related stocks saw shares of many tech companies zoom to record highs in the current quarter. Korea's SK Hynix and Samsung, along with America's Micron, entered the trillion-dollar club valuation on the back of blistering demand for their high-bandwidth memory chips (HBMs).

The selloff witnessed in tech stocks is emblematic of the risks associated with the AI boom as investors assess the costs of deploying AI models, with many companies reporting exhausting their yearly budgets in just a few months on frontier models. Apple's Tim Cook, speaking to the Wall Street Journal earlier, had said that a price hike looks imminent on the back of rising prices of memory chips.

The massive AI buildout has seen companies spending hundreds of billions of dollars on capital expenditure to make data centres capable of training large language models. Stocks also suffered on account of a hawkish stance by the US Federal Reserve, even as inflation fears receded over the reopening of the critical Strait of Hormuz after the US and Iran successfully concluded the first round of negotiations in Switzerland and the US eased sanctions on Iran.

(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)