US equity-index futures, particularly for the Nasdaq 100 Index, retreated by almost 1% as a sell-off in chipmakers deepened. This downward trend was mirrored in Asian markets, with MSCI's Asia-Pacific equities gauge dropping 2.1% and Japan's Nikkei 225 Stock Average losing 4.4%. The semiconductor sector faced significant pressure, with Taiwan Semiconductor Manufacturing (TSMC) shares falling over 4% after the company raised its full-year capital expenditure forecast to between $60 billion and $64 billion, up from $52 billion to $56 billion.
Investors are increasingly questioning whether the rapid, AI-driven rally in technology stocks has outpaced sustainable growth, especially as aggressive investment cycles become harder to justify. Analyst Fabien Yip from IG International noted that "Capex guidance comes into focus again as investors get increasingly sceptical on whether growth can be achieved sustainably while maintaining a healthy balance sheet." This sentiment is leading to volatility during earnings season, though analysts do not believe it signals the end of the AI story.
The broader sell-off in US technology stocks saw the Nasdaq Composite fall 1.47%. Key semiconductor companies were hard hit, with the VanEck Semiconductor ETF decreasing almost 4%. Individual stock declines included Arm Holdings (over 5%), Micron Technology (over 5%), Advanced Micro Devices (over 5%), Broadcom (over 5%), and US-listed shares of SK Hynix (over 13%). Netflix also contributed to negative sentiment, with shares falling 9% in extended trading due to a forecast of slowing sales growth.
On the economic front, softer US inflation eased expectations of an immediate Federal Reserve interest rate hike, and Middle East tensions continued to support oil prices. However, the market's primary focus remains on AI earnings, with investors looking for evidence that the billions of dollars in spending will translate into tangible returns. The declines were observed across various Asian markets, including a 1.9% drop in China and a 1.7% retreat in the Shanghai Composite, while SoftBank closed 9% lower in Tokyo, reflecting the widespread impact of the chip sector's struggles.
