Asian stocks are poised to continue Tuesday's decline after a substantial tech-led selloff on Wall Street intensified worries that the artificial intelligence-driven equity rally has gone too far. Equity-index futures for Japan and South Korea registered lower, while Hong Kong contracts showed slight gains. This comes after the tech-heavy Nasdaq 100 plunged 3.3% and the S&P 500 fell 1.4% on Tuesday. A closely watched semiconductor gauge, which had more than doubled from its war-driven lows, slumped approximately 8%.
The global tech stock market experienced its sharpest plunge since March, raising questions about the sustainability of the AI-driven rally. South Korea's Kospi index, considered a key indicator for AI-related trades, plummeted 10% on Tuesday, with major chipmakers Samsung and SK Hynix both seeing declines of over 12%. Taiwan Semiconductor Manufacturing Co. also experienced a slide amid a broader pullback from stocks associated with artificial intelligence.
The widespread tech sell-off dragged Asian stocks lower from recent record highs, following a slide in megacap tech stocks and rising bond yields. MSCI's gauge of regional equities declined more than 2% after reaching a record high on Monday. The South Korean Kospi index, for example, plunged over 6% due to renewed concerns that the rally in heavy-weight chip stocks is overstretched. A sub-gauge of Asian tech names ended an eight-day winning streak.
Investors are now closely watching Micron Technology's quarterly results, due on Wednesday, as a critical test for whether artificial intelligence spending can sustain its rally. Micron shares have surged more than 300% this year. The current market moves highlight mounting concerns about the prudence of investing extensively in the AI sector given the substantial capital involved and the lack of immediate returns, even though the AI trade has been a significant driver for global equity markets this year, helping them overcome challenges like the Middle East conflict and achieve successive record highs.
While the S&P 500 Index advanced 14% this quarter through Monday, the MSCI Asia Pacific Index saw an even larger surge of 26%. Benchmarks in Taiwan, South Korea, and Japan's Nikkei 225 have each soared at least 40%. However, individual markets faced significant downturns on Tuesday, with Japan's Topix down 2.6%, Australia's S&P500/ASX 200 down 0.3%, Hong Kong's Hang Seng Index dropping 1.8%, and the Shanghai Composite Index retreating 1.4%.
