Asia stocks tumble after AI rout rocks US markets

US stocks suffered a significant decline following a sharp dip in Asia's tech-focused markets, driven by concerns over stricter regulations and a slowdown in AI development. Japan's Nikkei, South Korea, and Taiwan's key indices all experienced declines of over 8%. The region's stock markets then appeared to stabilize as investors began buying dips.

European stocks saw a decrease in initial losses, closing down 0.6%. Nasdaq futures rose 1.4%, although confidence remained uncertain. The volatility index spiked, and the Nasdaq dropped by 5.5%. Global AI investments lost $3 trillion, with investors worried about potential Democratic policies that could slow AI expansion. Concerns over AI infrastructure costs and local opposition to data centers added to market uncertainty.

Major AI chipmakers, including Samsung Electronics and SK Hynix, fell sharply in South Korea, while Kioxia and TSMC declined significantly in Japan and Taiwan. SoftBank Group also saw an 11% drop. The selloff affected retail investors, hedge funds, and policymakers alike, with efforts underway to curb the decline. Investors questioned whether smaller AI firms could survive without the funding support from higher interest rates and tighter financial conditions.

CoreWeave's shares fell 10%, and its five-year credit default spreads widened to a record high. The Philadelphia Semiconductor Index dropped 12.2%, and the Nasdaq, after a brief rally, lost 12% from its record high. Despite the sell-off's intensity, some analysts believed the market bottom was near, and further liquidations of margin accounts were expected.

Treasury yields and other government bonds rose, while the US dollar weakened against safe-haven currencies like the yen and Swiss franc.