Asian stocks and US equity-index futures declined on Friday after a sell-off in chipmakers gained momentum, fueling investor doubts about whether the artificial intelligence-driven rally had advanced too rapidly. Concerns intensified after Taiwan Semiconductor Manufacturing (TSMC) issued a higher spending forecast, which overshadowed its otherwise solid earnings outlook. This led to significant drops, with TSMC falling over 4% and Japan's Nikkei 225 Stock Average losing 4.4%. Memory chip companies like Kioxia also experienced sharp declines, with Kioxia sinking by 15% and halving its market capitalization within a month, in part due to a $229 million patent infringement order.
The broader technology sector faced pressure as investors questioned if current valuations were sustainable given the accelerated spending on AI infrastructure. Nasdaq 100 Index futures retreated almost 1%, and the Nasdaq Composite Index fell 1.47% the previous day. Major technology companies like Alphabet, Nvidia, and Amazon saw their shares fall, with Alphabet declining nearly 4.5% after reports of delays in the public deployment of its Gemini 3.5 Pro AI model. Analysts like Fabien Yip from IG International noted increasing skepticism regarding sustainable growth and healthy balance sheets, while Andrew Jackson of Ortus Advisors suggested the sell-off was an unwinding of crowded AI momentum trades rather than a deterioration of long-term fundamentals.
Contributing to the market woes, Netflix shares dropped 9% in extended trading after the company forecast a second consecutive quarter of slowing sales growth, further dampening sentiment. This broader retreat in technology and AI-related shares followed a week of mixed economic signals, including softer US inflation data which eased expectations of an immediate Federal Reserve interest rate hike, and persistent Middle East tensions that continued to push oil prices higher. The focus, however, remained on AI earnings for tangible evidence that billions in spending would yield significant returns.
