Tech market sell-off deepens amid fears over US inflation and AI debt

A wave of panic swept through global markets on Thursday, as investors grappled with rising inflation and concerns over the heavy debt of the artificial intelligence sector. South Korea's Kospi 200 index, which is dominated by memory chip producers, plummeted over 8% to its six-month low. SK Hynix and Samsung Electronics, key players in the semiconductor industry, saw their stocks fall by nearly 11% and 9.5%, respectively.

Japan's Nikkei 225 also tumbled by 4.9%, following sharp declines in Kioxia and SoftBank, a major backer of OpenAI. This sell-off follows Wall Street's volatile day, with the Nasdaq Composite falling 1.9% and the S&P 500 dropping 1.1%, marking its worst performance since July.

The turmoil intensified after US data revealed that September's inflation rate surged to 3.7%, the fastest increase since May when the CPI hit a three-year high of 4.2%. This unexpected price surge has spurred fears of additional interest rate hikes by the Federal Reserve, with some investors already pricing in a possible increase as soon as the end of the month. Deutsche Bank analysts expressed concern, stating that the global economy was "muddling through" but a storm was brewing.

The recent price drops were not solely attributed to fuel costs driven by geopolitical tensions, such as the fallout from the US war on Iran. Instead, the increase in prices was a result of broader inflation across various consumer goods. This unexpected inflation surge has alarmed investors, who are now bracing for further interest rate hikes to combat rising prices.

The International Monetary Fund had previously warned about the potential for an AI share price crash that could destabilize global markets. The IMF emphasized that the consequences of such a correction could be felt worldwide, with Asian markets, particularly China and Taiwan, being the most vulnerable. Even China's Shanghai Composite Index saw a significant drop of up to 2.4%, marking its lowest level since August 2025.

Despite reporting strong profits in six consecutive quarters, Taiwan Semiconductor Manufacturing Company (TSMC), one of the world's leading chip makers, experienced a 2% decline. European stocks also followed the downward trend, with major indices such as the Europe Stoxx 600, UK's FTSE 100, France's CAC 40, and Spain's Ibex all recording declines. Germany's DAX also fell by 0.53%.