Asian markets sank on Friday, tracking a selloff on Wall Street as global markets faced a trifecta of challenges: the resurgence of Middle East conflict, a spike in oil prices above $100, and growing worries about the AI investment boom. Analysts noted that traders, previously able to offset negative news in one area with positives elsewhere, are now struggling to manage simultaneous threats. Tech firms, particularly those heavily invested in AI, bore the brunt of the selling.
Tech Sector Under Pressure
Tech giants, including US Magnificent Seven companies and Asian counterparts, saw substantial drops. Google-parent Alphabet and Tesla faced scrutiny over their massive capital spending on AI, leading to significant share price declines. Meta, Microsoft, and Amazon have also announced plans to spend over $700 billion this year on AI ambitions.
Geopolitical and Economic Factors
The escalation of hostilities in the Middle East has exacerbated inflationary pressures and raised concerns about interest rate hikes. Brent crude oil prices surged above $100 due to fresh attacks and blockades, further straining markets. Additionally, new US tariffs on trading partners over forced labor concerns added to the market's woes.
Market Reactions
Wall Street's hefty selling spilled over to Asia, with Seoul, Tokyo, Hong Kong, Shanghai, Sydney, Singapore, Taipei, and Manila all recording significant losses. Chipmakers, in particular, faced heavy selling, with Samsung, SK hynix, and Tokyo Electron among the hardest hit.
