Asian stocks slump after US tech rout amid AI jitters

Asian stock markets experienced a significant decline on Friday, following a substantial sell-off in US technology stocks the previous day. Japan's Nikkei 225 index plummeted 5.5% during early trading hours, while South Korea's Kospi index suffered a 8.8% drop, prompting a circuit breaker to halt trading for 20 minutes. Taiwan's TAIEX index also saw a decline of over 8%.

Major Asian technology firms, such as Samsung Electronics, SK Hynix, and Taiwan Semiconductor Manufacturing Company (TSMC), suffered the most significant losses due to the AI-related sell-off. Samsung shares plummeted nearly 10%, while SK Hynix saw a decline of over 11%. Chip-related companies in Japan, including Tokyo Electron and Kioxia, also faced sharp declines, with the former trading down about 9% and the latter shedding 13%.

European stock futures experienced a 1% drop, suggesting the sell-off might extend across to Europe. The previous day, US markets faced a sharp retreat in tech stocks, particularly those involved in AI infrastructure development, such as data centers. The Nasdaq fell 5.52% and erased approximately $2.5 trillion in market value, while the broader S&P 500 index declined by 4.4%.

This downturn was attributed to growing investor concerns about the substantial AI spending plans and their potential profitability. The recent US midterm elections, where Democrats gained control of both chambers of Congress, added to the worries. Some newly elected Democratic governors pledged to slow down AI development and halt data center construction due to public opposition.

Market analyst Michael McCarthy from Moomoo noted that this represents a significant shift in market sentiment, with abrupt directional changes often marking turning points. The steep sell-off observed on Friday indicates that the market is currently headed in that direction.