On a Thursday in mid-October, Asian markets bore the weight of a turning tide: South Korea's Kospi shed 8% and Japan's Nikkei 5%, as the long enthusiasm for artificial intelligence met a harder economic reality. The trigger was an American inflation report that came in hotter than economists had hoped, rekindling fears that prices and borrowing costs would stay stubbornly high, while energy prices carried the echo of the Iran war. Those who had ridden the AI boom found their gains thinning, and the question now hanging over the region is whether the chip rally can hold its footing before the n
Tech Sell-Off Drags Asian Stocks Lower as Kospi Drops 8% and Nikkei Tumbles 5%
On a Thursday in mid-October, Asian markets bore the weight of a turning tide: South Korea's Kospi shed 8% and Japan's Nikkei 5%, as the long enthusiasm for artificial intelligence met a harder economic reality. The trigger was an American inflation report that came in hotter than economists had hoped, rekindling fears that prices and borrowing costs would stay stubbornly high, while energy prices carried the echo of the Iran war. Those who had ridden the AI boom found their gains thinning, and the question now hanging over the region is whether the chip rally can hold its footing before the next signal arrives.
On Thursday, South Korea's Kospi closed down 8% at 5,527.12, a steep fall that left it more than 16% lower over the past month and far from the 9,000 peak it reached in June, when artificial intelligence enthusiasm sent it to an all-time high.
The heaviest losses fell on the chip makers. Samsung Electronics dropped 9.7% and SK Hynix 11.1%. In Japan the Nikkei 225 tumbled 5%, with SoftBank, an OpenAI investor, down 9.6% and chip-equipment and memory names such as Tokyo Electron and Kioxia falling sharply. Taiwan's Taiex slid 3.4%, while Hong Kong and Shanghai held up somewhat better.
The spark came from Wall Street the day before, where the Nasdaq fell 1.9% as AI stocks retreated, Nvidia and AMD leading the decline. Behind it lay an inflation report showing US consumer prices up 3.7% in September, above both August's pace and forecasts.
Bond markets added pressure. Long-term Treasury yields have climbed on inflation worries linked to the Iran war's energy shock and rising US debt, touching 5.35% earlier this month, the highest since 2002. Oil eased but remained near $104 a barrel for Brent, well above its pre-war level of about $72.
Attention now shifts to TSMC's earnings report, which will test whether the AI trade can steady itself, with oil and Treasury yields watched closely for signs of what comes next.
On Thursday, South Korea's Kospi index closed out a brutal session down 8%, landing at 5,527.12. A month earlier it stood well above that level. It has now dropped more than 16% over that stretch, and it sits far below the 9,000 mark it crossed in June, when enthusiasm for artificial intelligence pushed it to an all-time high.
The damage was concentrated in the chip sector. Samsung Electronics slid 9.7%, and memory chipmaker SK Hynix fell 11.1%. In Japan, the Nikkei 225 tumbled 5% to 64,334.68. SoftBank Group, an investor in OpenAI, lost 9.6%. Tokyo Electron, which makes chip equipment, dropped 7.5%, and memory chipmaker Kioxia Holdings gave up 11.2%.
Other markets in the region were hit less severely. Taiwan's Taiex, which has also ridden the AI boom, fell 3.4%. Its biggest name, Taiwan Semiconductor Manufacturing Co., dropped 1.8% ahead of its earnings report. Hong Kong's Hang Seng lost 1.3% to 24,009.28, and the Shanghai Composite slipped 2% to 3,692.65. Australia's S&P/ASX 200 edged down just 0.2% to 8,710.20. U.S. equity futures were also lower.
The trigger came from Wall Street on Wednesday. The S&P 500 fell 1.1%, the Dow Jones Industrial Average dipped 0.1%, and the technology-heavy Nasdaq composite slipped 1.9% as AI-related stocks retreated. Nvidia lost 3.2%, Broadcom gave up 3.1%, and Advanced Micro Devices declined 5.7%.
Behind that selling was a hotter-than-expected inflation report. The U.S. said Wednesday that consumer prices rose 3.7% year-on-year in September, up from 3.4% in August and worse than economists had forecast.
Bonds have added to the pressure. Yields on longer-term U.S. Treasuries have jumped on inflation worries tied to the global energy shock from the Iran war, along with the continuing rise in U.S. government debt. The 10-year yield eased to 5.10% on Thursday after briefly spiking above 5.32% on Wednesday. Earlier this month it reached 5.35%, its highest level since 2002.
Oil was slightly lower as uncertainty over global supply and the situation in the Middle East dragged on. Brent crude, the international benchmark, fell 1.5% to $104.47 a barrel, still well above the roughly $72 where it traded before the Iran war began in late February. Benchmark U.S. crude declined 1% to $94.17.
TSMC's earnings report is the next test for the AI-linked trade, and oil and Treasury yields will remain the other gauges to watch.
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