Asian AI, chip stocks tumble as higher yields revive valuation concerns

Asian technology and semiconductor stocks experienced a sharp decline on Wednesday, further exacerbating a global sell-off. The decline was fueled by the rise in long-term bond yields, which raised doubts about the lofty valuations of AI-linked companies and the expenses associated with financing the sector. SoftBank Group, a major Japanese tech conglomerate, reported a more than 10% drop in its shares following a Nikkei report that the company intends to issue around 1 trillion yen of corporate bonds targeted at retail investors. This retail bond issuance is projected to be the largest-ever by a Japanese company.

Renesas Electronics and Kioxia Holdings, both Japanese semiconductor firms, also suffered declines, with their shares plummeting 9% and nearly 13% respectively. The Nikkei 225 index experienced a near 3% drop, mirroring the losses on Wall Street's tech-heavy stocks. In South Korea, the KOSPI index fell by 5.2%, with Samsung Electronics and SK Hynix Inc both experiencing significant losses of 7.5% and 10% respectively.

The decline in Asian technology stocks followed a sharp downturn in U.S. chip stocks the previous night. Nvidia, Micron Technology, and SanDisk all witnessed notable losses of 2.3%, 7%, and 9% respectively. The downward trend was further amplified by a global bond selloff. The U.S. 30-year Treasury yield surged to a five-year high of 5.337%, its highest level since 2007, while the 10-year yield hovered near 4.70%.

The sell-off underscores the heightened sensitivity of AI-related equities to financing costs, despite the robust demand for chips and data center infrastructure.

Investors are also eagerly awaiting minutes from the Federal Reserve's July meeting, which could provide insights into the interest rate outlook. Higher yields pose a significant risk to growth stocks, whose valuations hinge on future earnings.