Asian stocks slump after US tech rout amid AI jitters

Asian equity markets experienced a significant downturn on Friday, following a dramatic collapse in US technology stocks the previous day. Japan's Nikkei 225 index dropped 5.5% in early trading, while South Korea's tech-focused Kospi index plummeted over 8%, prompting a 20-minute trading suspension through a circuit breaker. Taiwan's TAIEX index also fell by more than 8%.

Major Asian tech companies such as Samsung Electronics, SK Hynix, and Taiwan Semiconductor Manufacturing Company (TSMC) suffered the most substantial losses amid an AI-related sell-off. Samsung's stock plummeted nearly 10%, while SK Hynix saw a decline of over 11%. Similarly, chip-related sectors in Japan faced heavy losses, with Tokyo Electron shares falling roughly 9% and Kioxia shedding 13%.

European stock futures fell by 1%, suggesting that the market sell-off could potentially spread to Europe. The US tech market witnessed a sharp retreat on Thursday, primarily driven by a drop in AI-related infrastructure stocks like data centers. The Nasdaq fell by 5.52%, causing a loss of approximately $2.5 trillion in market value, while the broader S&P 500 index dropped by 4.4%.

This market decline came as investors became increasingly concerned about the substantial AI spending initiatives and their potential to generate profits. The recent US midterm elections, which saw Democrats gain control of both houses of Congress, further fueled these worries. Some newly elected Democratic governors had pledged to slow down AI development and halt the construction of data centers due to rising public opposition.

Michael McCarthy, the chief executive for Australia and New Zealand at online brokerage Moomoo, noted that there was a clear shift in investor sentiment, with markets often experiencing sharp directional changes accompanied by significant price swings. The recent sell-off indicated that investors were heading in a downward trajectory.