Asia stocks tumble as AI rout batters Japan, S. Korea

Asian stocks experienced a significant decline on Friday, with Japan and South Korea taking the lead in a region-wide sell-off, according to Investing.com. The drop followed a particularly sharp decline in Wall Street stocks the previous day, with the S&P 500 falling 4.4%, the Nasdaq Composite plummeting 5.5%, and the Dow Jones Industrial Average losing 3.4%. The Philadelphia Semiconductor Index saw the most dramatic drop, falling 12.3%.

In South Korea, the KOSPI index plummeted as much as 8.8% to 4,911.28 points, its lowest level since early February. The Korea Exchange intervened to halt trading for 20 minutes following the 8% drop. Shares of Samsung Electronics and SK Hynix suffered particularly heavy losses, with declines of 4.1% and 7% respectively.

Japan's Nikkei 225 index also suffered, falling as much as 7.1% and ending the day around 5.5% lower. This marked a more than 20% decrease from its June record high, and pushed the Nikkei into bear-market territory. The broader TOPIX index fell nearly 6% as well. Semiconductor equipment maker Advantest, memory-chip producer Kioxia Holdings, and SoftBank Group were among the hardest hit, extending a recent trend of losses in tech stocks.

The sell-off followed a steep decline in U.S. stocks on Thursday, with the S&P 500 falling 4.4% and the Nasdaq Composite plunging 5.5%. Qualcomm shares also saw a significant drop of nearly 10% after smartphone chip sales fell short of analyst expectations. Concerns over elevated valuations and the returns on massive AI infrastructure investments have been adding pressure on semiconductor companies.

The recent U.S. midterm elections have added an extra layer of uncertainty, with Democratic gains raising concerns about potential increased scrutiny of data-centre development and possible slowdowns, particularly in states where candidates campaigned against large-scale projects.

While Democrats' victory in the midterms may have initially bolstered risk appetite due to expectations of efforts to end the Iran war, concerns over AI investment and semiconductor earnings have now taken center stage. Oil prices also continued to rise in Asian trading after sharp losses earlier in the week.