Asian Stocks Tumble as AI-Related Sell-Off Hits South Korean and Japanese Markets

Asian stocks fell sharply on Tuesday, with technology-heavy markets in South Korea and Japan leading the losses, as a global sell-off in semiconductor shares deepened. The downturn was fueled by fresh concerns over the scale of investment in artificial intelligence and reports of intensifying competition in the chip-making equipment sector.

Sentiment was also pressured by a negative lead from U.S. equity futures, with Nasdaq 100 Futures down 0.7% and S&P 500 Futures slipping 0.2% during Asian trading hours.

Chip Rout Batters KOSPI and Nikkei

South Korea and Japan bore the brunt of the regional sell-off, with steep losses in major chipmakers and related industries.

• South Korea’s KOSPI benchmark index plunged over 9% to its lowest point since mid-April, a move so severe that it triggered market sidecar and circuit-breaker mechanisms.
• Japan’s Nikkei 225 fell as much as 4% to its weakest level since May 22, while the broader TOPIX index declined 3%.

Key semiconductor stocks recorded double-digit losses. In South Korea, memory chip giant SK Hynix Inc tumbled as much as 13%, while Samsung Electronics Co Ltd dropped by as much as 10%. Japanese firms were also hit hard, with Kioxia Holdings Corp down as much as 18%, and major equipment makers including Tokyo Electron Ltd. and Disco Corp sliding more than 9%.

AI Investment and Competition Fears Spook Investors

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The sell-off was driven by two primary concerns. Investors grew cautious following reports that NVIDIA's recent AI-related financing commitments had surpassed $750 billion, sparking worries about rising leverage and whether demand for AI infrastructure can sustain such unprecedented investment.

Furthermore, a report from The Information stated that a Chinese state-backed company had started mass-producing immersion deep ultraviolet (DUV) lithography machines. This development raised concerns about increased competition for established Japanese semiconductor equipment makers and European industry leader ASML Holding NV.

China Markets More Resilient

In contrast to the regional trend, Chinese and Hong Kong technology shares demonstrated greater resilience. While mainland China's Shanghai Composite and CSI 300 indexes fell 0.6% and 1.2% respectively, Hong Kong’s Hang Seng index edged up 0.3%.

This relative stability was attributed to optimism surrounding Beijing's goal of semiconductor self-sufficiency. The news of domestic DUV lithography capabilities, which unsettled Japanese markets, was viewed as a positive step for local Chinese manufacturers in closing the technology gap with global rivals.

Investors are now looking ahead to a week of significant market catalysts, including monetary policy decisions from the U.S. Federal Reserve and the Bank of Japan, as well as quarterly earnings results from tech giants Microsoft, Meta Platforms, Apple, and Amazon.