Asian stock rout deepens on AI worries ahead of tech earnings

Asian stock markets experienced another brutal selloff on Wednesday, extending recent losses as anxieties surrounding artificial intelligence (AI) valuations, heightened competition, and corporate spending cast a shadow over the region's tech sector. The downturn occurred just ahead of crucial earnings reports from major US tech firms and an anticipated policy decision from the US Federal Reserve.

Asian chipmakers, which have been at the forefront of this year's AI-driven rally, are now at the epicenter of investor concerns about the sustainability of these gains. South Korea's KOSPI index fell 5 percent, erasing earlier gains and reversing a significant drop from the previous day. Despite SK Hynix reporting a more than sixfold increase in quarterly operating profit, its shares fell 9 percent as the results narrowly missed elevated market expectations.

“

With the FOMC meeting sandwiched between major US tech earnings this week, and expectations for AI capex already elevated, investors appear to be taking some risk off the table ahead of a critical test for both AI spending expectations and market liquidity.

"With the FOMC meeting sandwiched between major US tech earnings this week, and expectations for AI capex already elevated, investors appear to be taking some risk off the table ahead of a critical test for both AI spending expectations and market liquidity," noted Gary Tan, a portfolio manager at Allspring Global Investments. MSCI's broadest index of Asia-Pacific shares outside Japan slipped 1 percent, heading for an 8 percent monthly decline. Japan's Nikkei also fell 1 percent, bracing for a significant monthly drop.

Meanwhile, oil prices jumped significantly. Brent crude futures rose 3 percent to $86.80 per barrel, and US West Texas Intermediate (WTI) crude climbed more than 3 percent to $81.95. This surge followed reports from the US Central Command indicating that Iran had launched multiple ballistic missiles, which were successfully intercepted. "The latest attack highlights that the two sides remain a long way from resolving the core dispute of passage through the Strait of Hormuz that caused the earlier MOU to collapse," said Tony Sycamore, a market analyst at IG, referring to the potential impact on vital shipping lanes.

“

The latest attack highlights that the two sides remain a long way from resolving the core dispute of passage through the Strait of Hormuz that caused the earlier MOU to collapse.