Asian stocks are anticipated to extend losses from Tuesday, following a significant tech-led selloff on Wall Street that has fueled concerns that the AI-driven equity rally may have gone too far. Equity-index futures for Japan and South Korea indicated declines, while Hong Kong contracts suggested modest gains. In early Wednesday trading, US equity contracts edged higher after the tech-heavy Nasdaq 100 experienced a 3.3% tumble 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, significantly slumped by about 8%.
The global equity rout was triggered by renewed concerns that the artificial intelligence-driven rally might have run too far and too fast. This led to the Asian benchmark falling the most since early March. The Nasdaq 100 plunged 3.3%, and the S&P 500 fell 1.4%. The semiconductor gauge's 8% drop was particularly notable given its previous performance. The volatile market backdrop has increased focus on memory chipmaker Micron Technology’s results, expected later for Wednesday, which are seen as crucial in determining if demand for AI infrastructure remains strong enough to sustain this year's rally.
The selloff was felt across global markets, with South Korea's Kospi Index, which is heavily weighted with chip companies, tumbling 10% in the previous session. While it pared an early advance, other regional players like Taiwan Semiconductor Manufacturing (TSMC), which accounts for over 10% of the regional gauge, saw losses of 3% after initially weathering the broader rout. This concern over whether massive spending commitments by technology firms will generate sufficient returns, combined with elevated valuations and crowded positioning, has led to sharp pullbacks in AI-linked stocks.
