Asian equity markets experienced a significant decline on Wednesday, continuing a downward trend initiated by concerns over a potential bubble in artificial intelligence (AI) investments that impacted US markets. South Korea’s Kospi, which had been one of the strongest performing indices this year due to excitement surrounding AI, plummeted as much as 6.2 percent. Japan’s Nikkei 225 index also faced a considerable drop, falling 4.3 percent in early trading before somewhat recovering.
This sell-off followed a notable decline in US markets the previous day, with the S&P 500 dropping by 1.2 percent and the tech-centric Nasdaq witnessing a steeper 2 percent fall. Investors are increasingly anxious about the high valuations of AI companies, with several Wall Street executives cautioning that markets may be vulnerable to a significant contraction.
In Hong Kong, the Hang Seng index declined by 0.9 percent, while mainland China’s benchmark CSI 300 lost 0.7 percent. Taiwan’s Taiex was not spared from the downturn, shedding 2.4 percent. Predictions indicate that US and European markets may face further declines, with futures for the Stoxx Europe 600 index and Nasdaq 100 both dropping by 1 percent during Asian trading hours.
Andrew Schlossberg, chief executive of Invesco, emphasized the prevailing sense of caution, noting that the market could be closer to a correction than another significant rise. His comments were made during a financial summit organized by the Hong Kong Monetary Authority.
Despite robust performance earlier in the year, Asian stock markets have seen their gains largely driven by companies tied to the demand for AI, particularly in the US. Major players like OpenAI and xAI, co-founded by Elon Musk, have seen their valuations soar repeatedly throughout the past year. In the past month, expectations for AI growth have significantly increased in North Asia, driven in part by partnerships between regional chip manufacturers and US AI firms.
Chipmakers in Asia faced the brunt of the sell-off, with SK Hynix and Samsung Electronics—both key manufacturers of high-bandwidth memory chips used for AI—losing 7 percent and 6.1 percent, respectively. Taiwan Semiconductor Manufacturing Company, the world’s largest chipmaker, saw its shares drop by 3 percent.
In financial markets, yields on 10-year US Treasuries fell slightly, decreasing by 0.03 percentage points to 4.05 percent, while the US dollar weakened by 0.1 percent against a basket of currencies. The dollar also declined by 0.3 percent against the yen, trading around ¥153.1, and yields on the 10-year Japanese government bond decreased by 0.01 percentage points to 1.65 percent.
In other asset classes, Bitcoin managed to recover from previous losses, gaining 0.9 percent to reach $101,209 per token. Gold also saw a minor increase of 0.2 percent, trading at $3,940 per troy ounce after experiencing selling pressure the day before.
