Media365
Asian stock markets extended their sharp selloff on Wednesday as investor anxiety over the sustainability of the artificial intelligence (AI) boom intensified ahead of earnings from major US technology companies and a closely watched US Federal Reserve policy decision.
The latest wave of selling was led by semiconductor stocks, with South Korean memory chip giant SK Hynix plunging 9 per cent despite reporting a more than six-fold jump in quarterly operating profit. Investors were disappointed that the company’s results failed to meet elevated expectations, reinforcing concerns that the AI-driven rally may have run ahead of fundamentals.
The South Korean KOSPI index fell more than 11 per cent, extending losses after a 10 per cent decline in the previous session and touching its lowest level since early April. Taiwan’s benchmark index dropped 5 per cent, while Japan’s Nikkei 225 declined 2.6 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan lost another 2.45 per cent, following a 3.6 per cent decline a day earlier.
Market participants said investors are becoming increasingly demanding as AI-related companies are expected not only to deliver strong earnings but also provide confidence that billions of dollars being invested in AI infrastructure will generate sustainable returns.
Gary Tan, portfolio manager at Allspring Global Investments, said SK Hynix’s earnings were strong by conventional standards, but investors were looking for additional catalysts such as long-term customer agreements and stronger shareholder returns to justify the premium valuations assigned to AI-linked semiconductor companies.
Attention has now shifted to quarterly earnings from Microsoft and Meta Platforms, which are expected later in the day. Their results are being closely watched after Alphabet and Tesla unsettled investors last week with weaker-than-expected cash flow numbers, raising fresh questions over whether the massive capital expenditure on AI is translating into meaningful financial returns.
Sean Teo, a sales trader at Saxo in Singapore, said this earnings season would need to demonstrate that the enormous investments in AI infrastructure are beginning to pay off. He also warned that investors are becoming uncomfortable with what appears to be a circular investment cycle, where a handful of large technology companies continue investing in each other, making it difficult to assess genuine end-user demand.
The cautious sentiment spilled over into global markets, with Nasdaq futures falling 0.7 per cent and European futures declining 0.6 per cent during Asian trading hours. Hong Kong’s Hang Seng Index, however, bucked the regional trend and gained 1.4 per cent.
Meanwhile, crude oil prices surged more than 3 per cent after fresh attacks in the Middle East reignited concerns over supply disruptions. Brent crude climbed above $87 a barrel, while US West Texas Intermediate (WTI) crude traded above $82 per barrel after reports that Iran launched multiple ballistic missiles, which were intercepted by U.S. forces.
The renewed geopolitical tensions have once again brought inflation risks into focus just hours before the Federal Reserve announces its monetary policy decision. Markets remain divided over the outcome, with traders pricing in roughly a one-in-three chance of a rate hike under the Fed’s new communication framework led by Chair Kevin Warsh.
Analysts at Citadel Securities said markets may be underestimating the possibility of a more hawkish Federal Reserve, arguing that rising energy prices could tilt policymakers toward another interest rate increase despite expectations that rates will remain unchanged.
With AI valuations under pressure, geopolitical risks resurfacing and central bank uncertainty looming, global investors are bracing for another volatile trading session.
