Asia Tech Rout Resumes as Stocks Slide on AI Valuation Fears

(Bloomberg) — Asia’s tech-heavy markets slumped as selloffs in sector leaders resumed on mounting concerns over stretched AI-related valuations.

South Korea’s Kospi index fell 3.8% on Friday, with heavyweights Samsung Electronics Co. and SK Hynix Inc. bearing the brunt of the selling. Taiwan’s benchmark Taiex declined 3.6%, the sharpest drop since April. Japan’s Nikkei 225 index, home to many of the country’s top tech names, also slid 2.4%.

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The declines follow a sharp reversal on Wall Street, where an Nvidia Corp.-led rebound quickly fizzled and investors fled from risk assets, including cryptocurrencies. Persistent doubts over whether AI spending will generate sufficient returns continue to spur volatility across the region’s markets. Uncertainty over the Federal Reserve’s policy path added to investor jitters.

“With worries mounting that the AI rally has become over-extended, tech names are getting hit,” said Jung In Yun, chief executive officer at Fibonacci Asset Management Global. “This is rather a risk-off rotation, not a fundamental collapse. So depending on what the Fed signals in coming weeks, there’s room for flows to stabilize — or even reverse.”

Read: Wall Street Stunned as Reversal in S&P 500 Erases $2.7 Trillion

On Thursday, the S&P 500 sank to its lowest level in more than two months, with Nvidia sliding 3.2% despite its upbeat earnings forecast.

Relief from the US chipmaker’s guidance briefly lifted sentiment, but questions over the durability of the rebound suggested only a temporary reprieve.

Asia’s leading chip suppliers to Nvidia led the losses in the region. Taiwan Semiconductor Manufacturing Co.’s shares fell 4.8%, while Korean peers Samsung Electronics and SK Hynix retreated 6% and 8.8%, respectively, according to Korea Exchange prices.

AI-related names also were among the biggest losers in Japan, with SoftBank Group Corp. declining 11%. Chip-gear makers Kioxia Holdings Corp., Advantest Corp. and Ibiden Co. each lost more than 9%.

Negative sentiment was exacerbated by a plunge in US memory and data storage-related stocks — Sandisk Corp. fell 20% — after reports that Korean firms plan to expand chip production.

“Memory capex is bound to explode next year, but I wasn’t expecting such a big correction,” Amir Anvarzadeh, Japan equity strategist at Asymmetric Advisors Pte, wrote in a note. “This is the segment which we have been taking shelter in” due to climbing NAND and DRAM prices.