Tokyo and Taipei led the decline in Asian markets on Friday, with tech firms facing substantial losses as investors grow cautious about the AI-driven rally. The AI boom has propelled technology valuations to unprecedented heights, but recent concerns about the sustainability of these valuations have emerged.
The Philadelphia Semiconductor Index has dropped about 19 percent from its June peak, reflecting investor worries about the AI trade. Asian markets, particularly Seoul's Kospi, have experienced significant volatility, with the index more than doubling in the first half of the year before losing about a third of its value since June.
Japan's Nikkei fell by as much as four percent, with major tech firms like Advantest and SoftBank losing around nine percent. Chipmaker Kioxia saw a 16 percent drop, resulting in a loss of more than half its value since hitting a record high last month.
Taiwan's Taiex also declined by four percent, with TSMC, a leading chipmaker, retreating more than three percent despite announcing record second-quarter profits and plans to invest $100 billion in Arizona. Other markets in Hong Kong, Shanghai, Singapore, and Sydney also recorded losses.
Market analyst Fawad Razaqzada noted that the rally in AI-related stocks may be losing momentum, with some investors questioning the returns on the enormous sums committed to AI infrastructure. He suggested that the selling could be a period of portfolio rotation, with investors reallocating capital towards sectors with more attractive valuations.
The downturn in Asia followed losses in New York, where the Nasdaq dropped more than one percent due to sharp falls in Nvidia and Amazon. Netflix also warned of slowing sales growth, further dampening market sentiment.
