Asian tech stocks plunge as AI sell-off spreads

TL;DR:

  • South Korea’s Kospi halted trading for 20 minutes after plunging nearly 9% at Monday’s open, its third circuit breaker this year.
  • Japan’s Nikkei fell around 4.5% as the AI-driven tech sell-off spread from Wall Street to Asia.
  • Investors are “repositioning” over fears AI investment is overvalued, with the “burden of proof” rising on real revenue.

The wobble in AI valuations has become a rout. Asian tech stocks plunged on Monday, forcing South Korea’s Kospi to halt trading for 20 minutes after it fell nearly 9% within minutes of the open — the third time a circuit breaker has triggered this year. The slide followed Friday’s drop on Wall Street, where the Nasdaq lost about 4%, its worst day in over a year.

A market demanding proof

The sell-off concentrated in the stocks that led the rally. Japan’s Nikkei fell around 4.5%, its steepest drop in three months, while Samsung and SK Hynix — the world’s two largest memory-chip makers — slid sharply, and Taiwan’s TSMC dropped 3%. Saxo strategist Charu Chanana described a “messy mix” of shocks, with investors “repositioning over fears the investments into artificial intelligence may be overvalued”. Her summary captures the shift in mood: investors want “clear signs that AI demand has translated into real revenue. The burden of proof has gone up.” Renewed strikes between Iran and Israel added pressure, pushing Brent crude up 4.6% to $97.34 (£73.05) and stoking inflation worries.

Not everyone flinched. Nvidia chief Jensen Huang — in South Korea announcing fresh AI deals — waved off the rout as a buying opportunity, insisting “the future of AI is very bright”. South Korea’s president argued domestic shares remained “slightly undervalued”, even as the tech-heavy Kospi gave back part of a six-month doubling.

Looking forward

For UK investors, the episode is a reminder of how exposed portfolios have become to a narrow band of AI names, and how quickly sentiment can turn — a continuation of last week’s chip sell-off rather than a one-off. The deeper signal is a market transitioning from rewarding AI promise to demanding AI profit. Firms banking on cheap capital for AI build-outs may find the terms tightening if the “burden of proof” keeps rising.

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