AI anxiety sparks tech rout, broad selloff in Asian markets
- South Korea’s KOSPI dived more than 8% to a three-month low, triggering a circuit breaker
Asian markets fell sharply, led by chipmakers, due to unease over massive AI funding demands and a significant slide in oil prices, while US rate hike concerns persist.
- Asian chipmakers' significant decline amid AI funding concerns.
- China's rising competitiveness in the semiconductor sector.
- Oil price plunge following de-escalation of US-Iran tensions.
- Federal Reserve's potential interest rate hike this week.
SINGAPORE: Asian markets fell on Tuesday led by chipmakers on unease about the massive funding demands of the AI boom, while a slide in oil prices did relatively little to lift bonds and left traders nervous about U.S. rate hikes, maybe as soon as this week.
South Korea’s KOSPI dived more than 8% to a three-month low, triggering a circuit breaker, and Japan’s Nikkei slid 4%, following a 2.2% drop for the Philadelphia Semiconductor index.
Nvidia shares shed 5% overnight after the Wall Street Journal reported the company is in talks to provide roughly $250 billion in financing guarantees for OpenAI as part of a massive data centre project.
And the stellar 466% debut-day surge in CXMT Corp shares in Shanghai highlighted growing investor enthusiasm for China’s semiconductor sector and the rising competitive threat from Chinese rivals.
“There is clearly a growing sense of optimism within mainland markets about China’s ability to build a globally competitive AI ecosystem,” said Chris Weston, head of research at Pepperstone.
China has also begun manufacturing domestically developed immersion deep ultraviolet lithography machines, a chipmaking tool long dominated by Dutch supplier ASML, The Information reported on Monday, sending ASML shares down 8.5%.
South Korea’s SK Hynix fell nearly 11% and Samsung Electronics shares shed more than 9%, while in Tokyo some of the heaviest losers were Kioxia, down 18%, and Tokyo Electron, down 9.8%.
Chinese stocks also beat a retreat, with CXMT down 7% in early trade and chipmaking indexes lower.
Oil slides, us yields dip
Brent crude futures extended Monday’s nearly 9% plunge, falling to $87.55 a barrel, as a lull in hostilities between the U.S. and Iran followed Washington’s abrupt suspension of air strikes on Saturday.
President Donald Trump said on Monday the United States was having “good talks” with Iran and there was a chance of a deal.
The break in fighting pushed down benchmark 10-year U.S. Treasury yields by about four basis points to 4.64%, but hardly budged shorter-term rates.
Traders have priced about a 38% chance that the Federal Reserve hikes by 25 basis points on Wednesday.
“The U.S.-Iran War, by propelling the price of crude oil, remains the most important determinant of what will happen to the global economy in the next few months, and, by extension, what informs central bank policy outlooks, at the margin,” said Thierry Wizman, currency and rates strategist at Macquarie Group.
“We expect that the (Fed) this week will wish to adopt a tightening bias.”
Expectations for hikes sooner or later kept the dollar supported, holding the euro below $1.14 at $1.1370 and the Australian dollar just below 70 cents.
The yen traded at 163.78 to the dollar, barely above a four-decade low, with markets on edge about Japan intervening in the currency pair - particularly if the Bank of Japan leaves rates on hold this week and sets off another yen slide.
“If BoJ communication is not hawkish enough and USD/JPY heads higher, traders should anticipate an official response, including verbal intervention, rate checks, or even direct FX market intervention, perhaps on Friday,” said Wizman.
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