Doubts regarding the returns from artificial intelligence investments have sparked a sharp sell-off in chip stocks, deepening losses across global markets. In South Korea, the Kospi Index plummeted by as much as 8% during intraday trading, prompting a brief trading halt as investors shifted toward perceived safe-haven assets.
The MSCI Asia Pacific Index fell by 2.8%, heading toward its lowest close since July. Meanwhile, Nasdaq 100 futures dropped 0.9%, and European stock futures indicated approximately a 1% decline at opening.
Chip Stock Sell-off Intensifies
The sell-off that began in U.S. chip stocks extended its impact on Asian markets. Leading South Korean technology firms, Samsung and SK Hynix, saw their shares fall by over 10%.
“At the center of the sell-off are concerns about whether the billions invested in artificial intelligence will yield sufficient returns. This uncertainty increased worries over the sustainability of the AI rally, prompting investors to distance themselves from riskier assets.”
With a surge in demand for safe-haven assets, U.S. Treasury bonds gained value. The yield on the U.S. 10-year Treasury note fell by 8 basis points to 5.11%, while the 2-year Treasury yield dropped by 7 basis points to 4.72%.
Inflation and Interest Rate Expectations in Focus
The stock sell-off coincides with uncertainties surrounding inflation and monetary policy. In the U.S, the fastest inflation rise in the past five months had previously strengthened expectations for additional rate hikes. In this period of reassessment of the Federal Reserve’s policy outlook, the dollar weakened.
“Escalating oil prices, fueled by ongoing Middle Eastern conflicts, exacerbated inflation concerns. This situation kept expectations alive that central banks might resort to more aggressive tightening measures.”
Market attention is now focused on Fed Chair Warsh’s upcoming remarks in Bangkok on Friday. Investors will closely watch his statements for insights into the path of interest rates amid persistent inflation pressures and renewed stock market sell-offs.
