Asian technology stocks, particularly those in the chip sector, tumbled on Friday, extending a rout in U.S. semiconductor shares. This downturn was fueled by escalating concerns regarding the sustainability of AI-related spending and the high valuations of these companies. SoftBank Group Corp. saw a 9.2% drop, Tokyo Electron Ltd. fell 9%, and Advantest Corp. slid 9.4%, mirroring substantial losses on Wall Street overnight. Even Taiwan Semiconductor Manufacturing Co. (TSMC) shares fell 3.64%, despite reporting a sharp increase in profit that exceeded market expectations.
TSMC, a key player in the AI boom, raised its full-year capital expenditure forecast to between $60 billion and $64 billion, an increase from its previous range of $52 billion to $56 billion. However, investors focused more on the implications of aggressive investment cycles and potential challenges in justifying future profitability. Andrew Jackson, a strategist at Ortus Advisors, noted that the sell-off reflected an unwinding of crowded AI momentum trades rather than a deterioration of long-term fundamentals, but highlighted investor worries that TSMC's earnings were not strong enough to warrant further sector upside, leading to concerns about excessive spending.
The decline in Asian chip stocks followed another weak session for U.S. technology stocks, with the Nasdaq Composite Index falling 1.47% as semiconductor shares faced renewed pressure. The VanEck Semiconductor ETF dropped almost 4%, while individual companies like Arm Holdings Plc, Micron Technology Inc., Advanced Micro Devices Inc., and Broadcom Inc. each lost more than 5%. U.S.-listed shares of SK Hynix Inc. slumped over 13%. This broad market correction suggests investors are questioning whether the current high valuations in the AI sector can be sustained given the rapid acceleration of spending on AI infrastructure.
The market's reaction to TSMC's earnings and heightened capital expenditure points to growing investor caution. While TSMC confirmed robust AI demand and raised its revenue growth guidance for 2026, concerns about potential "malinvestment" and whether hyperscalers can generate adequate returns on massive capital deployment are emerging. This sentiment aligns with warnings from several strategists that investor expectations may have outpaced business fundamentals, leading to a re-evaluation of the AI sector's long-term growth trajectory.
