Asian stocks are poised to continue a decline seen on Wall Street, as a tech-led selloff deepened concerns that the artificial intelligence-driven equity rally has gone too far. Futures for Japan and South Korea's equity indices were lower, while Hong Kong contracts showed modest gains. US equity contracts edged higher in early Wednesday trading after a Tuesday where the Nasdaq 100 tumbled 3.3% and the S&P 500 fell 1.4%. A key semiconductor gauge, which had more than doubled from its war-driven lows, slumped about 8%.
The tech rout has engulfed global stocks, sparking fresh volatility after a nearly three-month surge in riskier assets. South Korea's Kospi plunged 10% from a record. In a rush for safety, Treasuries rose, and haven currencies like the Japanese yen and Swiss franc outperformed, while Bitcoin lost 3%. Oil prices dipped, with West Texas Intermediate crude falling 0.5% to $73.46 a barrel, amid reports of an interim peace deal between the US and Iran allowing more overt transit through the Strait of Hormuz.
The equity pullback on Tuesday comes as the market approaches the end of the first half of the year, which had seen significant gains driven by easing geopolitical tensions, strong earnings, and an AI trade revival. However, the tech rally has recently lost momentum due to doubts about whether the billions of dollars spent by large tech firms will generate sufficient returns. Attention is now shifting to Micron Technology Inc.'s results on Wednesday, which are expected to be a crucial test of whether demand for AI infrastructure is strong enough to sustain the current market rally. Micron shares dropped 13% on Tuesday.
