HONG KONG: Tech companies led a sell-off across Asia on Wednesday (Nov 5) as investors grow increasingly worried about an AI bubble following a rally this year that has seen valuations hit record highs.
Global markets have soared this year as an eye-watering flood of cash piled into companies linked to artificial intelligence, including US titans Nvidia, Amazon and Apple as well as Asian firms Samsung and Alibaba.
But despite strong earnings releases in recent quarters, traders have started questioning the wisdom of chasing ever-higher prices, with cash mostly funnelled into a handful of big-name companies.
The gains have also been helped by an easing of US trade tensions and expectations that the Federal Reserve will continue to cut interest rates into the new year.
However, last week’s warning from the US central bank that another reduction in December was not a foregone conclusion jolted sentiment.
After an uncertain start to the week Monday, Wall Street tumbled on Tuesday, with the tech-rich Nasdaq down more than two per cent and the S&P 500 off more than one per cent.
US software firm Palantir slumped 8.0 per cent despite reporting a 63 per cent surge in revenue and profit. Traders were also spooked by a slump in New York-listed Super Micro Computer in after-hours business and disappointing forecasts from Advanced Micro Devices.
Asia took up the baton in the morning, with Seoul and Tokyo the hardest hit, having just hit record highs.
However many markets recovered as the day wore on and pared many of the losses.
Seoul tanked six per cent at one point as chip giants Samsung and SK hynix took a beating but finished down 2.9 per cent.
“I view today’s decline as a correction to cool off an overheated market – a phase of adjustment,” Chung Hae-chang, analyst at Daishin Securities, told AFP.
“The recent rally was extremely steep, so this is the counterbalance.”
He also warned Seoul’s Kospi index could decline five per cent further and that “SK hynix and Samsung may also see corrections proportional to their earlier gains”.
Tokyo finished 2.5 per cent off, having dived more than four per cent. Still tech investment giant SoftBank still lost 10 per cent and Sony more than one per cent.
Nintendo, however, finished up more than six per cent a day after the gaming firm hiked forecasts for its Switch 2 console and annual profits.
https://www.channelnewsasia.com/business/assian-markets-fall-tech-company-sell-ai-bubble-fears-5446641
