Most Asian shares sank on Thursday as technology firms came under renewed pressure from worries about the AI boom, with Seoul again taking the brunt of the sell-off, while oil prices rose further as the US and Iran continued to stage trade strikes.
Regional investors were unable to build on a second day of gains on Wall Street, where more data showing easing inflation pushed back bets on a Federal Reserve interest rate hike later in the year.
Seoul’s stock sank more than seven percent as chip titans SK hynix and Samsung each gave up about 10 percent amid growing anxiety that the artificial intelligence rally — which had pushed both firms to record highs this year — has run its course.
Traders are wondering whether the huge sums pumped into the artificial intelligence sector in recent years can justify attractive valuations for some firms.
It comes after Dutch giant ASML, which makes state-of-the-art chipmaking machinery, reported a rise in second-quarter net profit and raised its full-year sales forecast.
Eyes are now on earnings from Taiwanese titan TSMC due later in the day.
While investors remain bullish on the outlook for the AI sector, analysts said the trade had become too crowded.
“Philadelphia’s semiconductor index has risen roughly 83 percent this year, beating estimates,” wrote Stephen Innes of SPI Asset Management.
“Strong profits and healthy demand can keep a trade alive, but they can’t prevent a correction when everyone already owns it.”
He added that investors were not “suddenly questioning whether the demand for AI infrastructure exists (but) asking how much of that demand has already been paid for in the share price.”
“Numbers can still be great and stocks can still fall. Once expectations are pushed to the rafters, even a good result can come up short,” he said.
Elsewhere in Asia, Tokyo and Taipei – both rich in tech firms – suffered big sell-offs, while Sydney, Shanghai and Wellington also fell.
However, Hong Kong was the outlier, climbing more than one percent as Chinese chip firms, which have been battered this year, enjoyed another advance.
The weak performance across Asia came even as all three major indexes in New York ended higher thanks to big gains in tech giants including Apple, Amazon and Facebook Meta.
That came after figures showed U.S. producer prices fell 0.3 percent in June thanks to lower energy prices after the U.S. and Iran reached a truce to reopen the Strait of Hormuz and allow crude to flow through again.
Data on Tuesday showed that consumer prices rose less than expected.
The readings calmed market concerns that the Fed would raise borrowing costs this month, although analysts warned that renewed hostilities, which have seen the US and Iran trade spat for about a week, could undo the good work.
Crude oil prices rose again on Thursday as traffic through the strait – through which a fifth of the world’s oil and LNG passes – thinned.
In currency markets, South Korea’s won strengthened slightly against the dollar after the country’s central bank raised interest rates for the first time since 2023 as it tackles stubborn inflation and an economy supported by strong chip exports.
And sterling held on to gains as it rose more than one percent against the greenback on Wednesday following reports that Home Secretary Shabana Mahmood – considered more reassuring to markets – was a front-runner to become the next finance minister.
– Key figures around 0230 GMT –
West Texas Intermediate: UP 0.6 percent to $80.11 a barrel
Brent North Sea crude: up 0.5 percent to $85.34 a barrel
Tokyo – Nikkei 225: DOWN 2.8 percent to 66,796.79 (break)
Seoul – Kospi: DOWN 7.1 percent to 6765.38
Hong Kong – Hang Seng Index: UP 1.3 percent to 25,001.27
Shanghai – Composite: DOWN 0.8 percent to 3,925.47
Pound/dollar: DOWN at $1.3525 from $1.3530
Euro/pound: UP to 84.76 pence from 84.72 pence
Euro/dollar: UP at $1.1465 from $1.1463 on Wednesday
Dollar/yen: DOWN at 162.11 yen from 162.27 yen
