BY COMFORT OGBONNA
Technology stocks across Asia suffered heavy losses on Tuesday as investors reacted to growing concerns over competition from China’s semiconductor industry and uncertainty surrounding the financial demands of the global artificial intelligence boom. Falling oil prices provided little relief as markets continued to prepare for the possibility of a U.S. interest rate increase as early as this week.
South Korea’s benchmark KOSPI index fell nearly 10% to a three-month low, triggering an automatic trading halt during the decline and putting the market on track for its steepest monthly drop since the Asian financial crisis of 1997. The index had surged more than threefold during the 12 months leading up to June, but it has since lost more than one-third of its value from its peak.
Major South Korean semiconductor companies faced intense selling pressure as investors rushed to lock in profits following a historic rally. Shares of SK Hynix and Samsung Electronics both declined more than 12%, reflecting concerns that the sector’s rapid growth may face new challenges from increasing global competition and questions about the sustainability of AI-related investment.
Japan’s Nikkei index also came under pressure, falling about 4% and reaching its lowest level in two years. The decline followed a sharp drop in U.S. semiconductor stocks, with the Philadelphia Semiconductor Index falling 2.2% in the previous session.
Analysts said the market downturn was not caused by a single factor but rather a combination of concerns surrounding artificial intelligence spending, semiconductor valuations, and China’s growing influence across the global chip supply chain.
“There is no single red flag driving the market,” said Chris Weston, head of research at Pepperstone. “It is a combination of concerns about AI funding and China’s rise as a competitor across the supply chain.”
Investor sentiment weakened further after reports that China has begun developing domestically produced immersion deep ultraviolet lithography machines, a highly advanced chipmaking technology that has historically been controlled by major global suppliers. The development raised concerns that Chinese companies could accelerate efforts to reduce their dependence on foreign semiconductor equipment.
Shares of major European chip equipment suppliers also declined following the reports, adding to broader market pressure.
China’s memory chip manufacturer CXMT attracted additional attention after completing a major stock market listing that raised billions of dollars. The company ended its first trading session as one of China’s most valuable publicly listed firms, increasing investor concerns that it could eventually expand production capacity and challenge established Korean semiconductor leaders.
“The market’s concern is less about CXMT’s current earnings and more about its ability to rapidly expand capacity and compete with Korean companies,” said Kim Seok-hwan, a market analyst at Mirae Asset Securities.
The semiconductor selloff also affected global artificial intelligence leaders. Shares of Nvidia declined after reports that the company was involved in discussions related to financing support for a major data center expansion linked to artificial intelligence development.
In Asia, several technology companies experienced steep declines. Shares of Kioxia in Japan dropped about 18%, while Tokyo Electron fell more than 11%. China’s CXMT shares also slipped in volatile trading.
Meanwhile, oil prices continued to decline as investors monitored developments in tensions between the United States and Iran. Brent crude futures extended their previous session losses, falling more than 1% to $87.19 a barrel after dropping nearly 9% on Monday.
Markets responded positively to signs that diplomatic discussions could reduce the risk of further escalation. U.S. officials said negotiations with Iran were progressing, raising hopes that supply disruptions in global energy markets could be avoided.
The decline in oil prices helped ease some inflation concerns, but investors remained cautious about the Federal Reserve’s upcoming policy decision. U.S. Treasury yields fell slightly, though short-term rates remained relatively stable as traders continued to assess the possibility of higher interest rates.
Financial markets are currently pricing in a significant chance that the Federal Reserve could raise interest rates by 25 basis points at its policy meeting this week.
“The conflict’s impact on oil prices remains a major factor influencing the global economic outlook and central bank decisions,” said Thierry Wizman, a currency and rates strategist at Macquarie Group. “We expect the Federal Reserve to maintain a tightening bias.”
Expectations of higher U.S. interest rates continued to support the dollar, keeping the euro below $1.14 at $1.1362, while the Australian dollar remained slightly below the 70-cent level.
The Japanese yen traded near 163.78 per dollar, remaining close to its weakest level in decades. Investors are watching closely for possible action from Japanese authorities if the currency weakens further, especially if the Bank of Japan leaves interest rates unchanged at its upcoming meeting.
Analysts warned that if the Bank of Japan does not deliver a strong enough message supporting tighter monetary policy, additional pressure on the yen could prompt government officials to consider measures ranging from verbal warnings to direct currency market intervention.
Global investors are now awaiting central bank decisions, economic data, and further developments in the semiconductor industry as they assess the outlook for technology stocks, inflation, and interest rates.
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