South Korea’s Kospi index, home to many companies tied to the AI infrastructure buildout, fell as much as 8% on Thursday, its worst loss since June 23, as concerns over potential overcapacity prompted investors to pare semiconductor holdings.
The Kospi has been volatile this year, and a blistering AI rally over the past year has also made the sector vulnerable to sudden swings in investor sentiment, with many investors now cautious.
Samsung Electronics and SK Hynix shed 9.1% and 14.6%, respectively, as US chipmakers dragged the benchmarks lower after media reports said Meta Platforms had plans to sell access to its AI computing power and models, sparking concerns about overbuilt capacity.
This situation led to a sell-off in Asia, and sentiment soured further on media reports that Apple was considering sourcing memory chips from two Chinese manufacturers, which could challenge South Korean chipmakers.
Taiwan stocks also dropped, dragged lower by chipmaker TSMC, which fell 1.6%, and the index later ended 0.6% lower.
According to the report, “Directionally, I think the sell-off is overdone.
The structural demand case for AI hardware doesn’t change in a single day,” said Dilin Wu, research strategist at Pepperstone, who believes the market needs earnings season to rebuild conviction.
TSMC’s July 16 results are the nearest test, and they will be closely watched by investors.
Globally, investors welcomed signs of progress in indirect talks between the US and Iran after Qatar said negotiations centred on the Strait of Hormuz had advanced, calming fears of disruptions to the vital oil shipping route, which is a key factor for the global economy.
Markets also took heart from comments from Federal Reserve chair Kevin Warsh and other policymakers pointing to a more even inflation outlook, which helped to improve market sentiment.
Focus now shifts to Thursday’s US non-farm payrolls data as investors seek fresh clues on the interest-rate outlook.
It is a key indicator.
Moves in regional currencies were muted against a broadly unchanged dollar index, with the rupiah pinned near the 18,000-per-dollar level for a second consecutive session, while stocks gained 1.4% due to the government’s moves to improve banking system liquidity and encourage credit growth.
DBS economist Radhika Rao said sentiments also benefited from the government’s decision to scale back allocations towards the flagship meals programme, which helped to boost investor confidence, and financial tools are becoming increasingly important for investors.
Philippine equities advanced 0.9%, while the peso was flat, and Malaysian stocks added 0.3%, while the ringgit advanced 0.3% in a quiet trading session.
In Tokyo, the yen suddenly surged against the dollar, with traders on alert for possible intervention by Japanese authorities to support the battered currency, which has been under pressure recently.
The yen was last trading near 161.71 per US dollar, and investors are now waiting for the next development in the market, which could be influenced by various factors, including the use of convertible bonds as a investment strategy.
Investors are also looking at other markets, such as the market for lab grown diamonds, which is becoming increasingly popular.
