Asian Tech Stocks Plunge Amid Inflation Fears and Rising AI Costs

Asian markets experienced sharp declines on Tuesday, led by technology and semiconductor stocks, as investors reacted to recent U.S. inflation data and growing concerns over the financing costs of artificial intelligence infrastructure. The sell-off, which began on Wall Street, spread to Asia, with South Korea's Kospi index dropping over 8%. Major chipmakers SK Hynix and Samsung saw their stocks plummet by approximately 11% and 10%, respectively. Other Korean tech firms like LG Innotek and Samsung SDI also suffered significant losses.

In Japan, the Nikkei index fell around 5.2%, with SoftBank Group down about 10%, Tokyo Electron down 8%, and Advantest down 14%. Hong Kong's Hang Seng and Shanghai's SSE Composite also traded lower. The primary concern for investors is that high borrowing costs, evidenced by the U.S. 10-year Treasury yield exceeding 5%, will hinder the substantial investments required for AI infrastructure development. CEOs from Broadcom and Intel had previously warned that financing, rather than chip or power shortages, could pose a greater challenge to AI expansion.

Despite the downturn, analyst Dan Ives of Yorkville Ives suggested that the current drops present a buying opportunity, citing strong underlying demand. He noted that rising interest rates increase financing costs but do not necessarily indicate a decline in demand, which would be a more significant warning sign. Wall Street futures also indicated a negative opening, with Nasdaq futures down 1.1%.

Overnight, U.S. markets closed sharply lower, marking the worst day in three months for major indices. The Nasdaq Composite fell 1.9%, the S&P 500 dropped 1.2%, and the Dow Jones Industrial Average declined 0.2%. The sell-off was driven by disappointing U.S. inflation figures, which dampened expectations for interest rate cuts and increased fears of further monetary tightening by the Federal Reserve. This led to a surge in Treasury yields.

In currency markets, the U.S. dollar strengthened against major currencies, reaching its highest closing level since March 2025, fueled by the inflation data and safe-haven demand amid fiscal pressures in Europe. Oil prices saw a reversal, falling this morning after rising the previous day due to supply disruption warnings and Middle East tensions. However, some market participants, like hedge fund manager Paul Tudor Jones, remain bullish on oil, predicting a significant price increase due to the conflict with Iran.

In Tel Aviv, dual-listed stocks are expected to weigh on the opening of the stock exchange, with a significant negative arbitrage gap for key tech and pharma companies like Tower Semiconductor, Teva, and Ormat Technologies. Conversely, Camtek and ICL Group are expected to provide some positive influence.