Asian stock markets saw a broad decline on Tuesday, with South Korea's Kospi index leading losses, plunging over 6% and even 10% in some reports, after Samsung Electronics' forecast triggered concerns about the sustainability of the AI-driven chip boom. Despite Samsung reporting a projected April-June operating profit of 89.4 trillion won ($58.44 billion), an eye-popping 19-fold jump, investors reassessed stretched valuations in AI-related stocks. This concern rippled across other Asian markets, with MSCI's broadest index of Asia-Pacific shares outside Japan falling 2.6%, Taiwan down 1.8%, and Japan's Nikkei shedding 2.4%. Chipmakers like SK Hynix also experienced significant drops, with losses exceeding 12% in some cases, highlighting the market's sensitivity to the semiconductor industry cycle.
The tech sell-off was not limited to Asia, as U.S. S&P 500 futures dipped 0.3% and Nasdaq 100 E-minis retreated 1.2%, following a slide in megacap tech stocks on Monday. The Philadelphia Semiconductor Index plunged 5.6%, with Micron Technology falling 7% and Nvidia sliding 2.3%. Analysts noted that while the overall AI growth narrative remains intact, investors are becoming more hesitant to pay a premium for this theme, especially with rising interest rates. A Bank of America survey indicated that 59% of fund managers are hedging AI downside risk by shifting to value, cyclical, and defensive sectors, suggesting a rotation away from high-multiple tech and AI-exposed names.
Oil prices, however, showed relative stability or edged slightly higher despite the stock market turmoil. U.S. crude rose 0.85% to $69.13 a barrel, and Brent rose 0.88% to $72.62 per barrel. This occurred as investors refocused on supply and demand dynamics, and in the context of ongoing U.S.-Iran peace talks, which President Trump indicated could either lead to a deal or military action. Geopolitical risks, including worsening tensions involving Iran, have kept oil prices elevated, with some reports noting prices above $90 a barrel. The dollar index traded at 100.88, while the yen bounced back from near 40-year lows.
