Technology stocks across Asia tumbled on Thursday as concerns over rising borrowing costs and mounting debt linked to artificial intelligence infrastructure unsettled investors, while government bonds gained as traders sought safer assets.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 3.4 per cent, extending its losing streak to four sessions. South Korea’s KOSPI plunged more than 8 per cent, while Japan’s Nikkei 225 dropped 5.4 per cent. US S&P 500 futures also declined 0.4 per cent.
The sell-off followed another difficult session on Wall Street, where stronger-than-expected US inflation data for September raised concerns that interest rates could remain elevated or rise further.
The S&P 500 lost 1.1 per cent, while the Nasdaq Composite fell 1.9 per cent. A semiconductor stock index also recorded its sixth consecutive day of losses as investors reduced exposure to companies whose growth plans depend heavily on access to cheap financing.
Oracle and cloud computing firm CoreWeave were among the AI-related stocks under pressure, reflecting growing concerns about the cost of building and operating data centres to support expanding artificial intelligence services.
The latest decline has exposed vulnerabilities in investment strategies built around expectations of sustained AI spending. Although demand for computing capacity remains strong, investors are increasingly scrutinising the debt required to finance new infrastructure and the time companies may need to generate returns.
JPMorgan analysts identified financing risks and delays to initial public offerings among the main concerns weighing on AI investments, as technology stocks continued to drive the broader market decline.
Asian Chipmakers Bear the Brunt
Companies supplying hardware for AI systems suffered steep losses across Asian markets.
Samsung Electronics shares plunged 9.9 per cent, while memory chipmakers SK Hynix and Japan’s Kioxia Holdings each fell more than 11 per cent. SoftBank Group, a major investor in AI ventures, dropped more than 9 per cent, while Taiwan Semiconductor Manufacturing Company declined 2 per cent.
Credit markets also showed signs of strain. The cost of insuring against defaults on debt issued by Oracle, SoftBank and CoreWeave increased, with credit default swaps on some of the companies reaching record levels.
The developments have intensified concerns about whether the financial commitments behind the AI expansion can be sustained if interest rates remain high and borrowing becomes more expensive.
However, not all investors viewed the sell-off as evidence of a lasting deterioration in the sector. Some pointed to relatively light trading volumes and the tendency for October to bring heightened market volatility.
Taiwan Semiconductor Manufacturing Company provided a counterpoint to the gloomy market mood, reporting a record third-quarter net profit of T$763.1 billion, equivalent to $23.59 billion. The figure represented a 69 per cent increase from a year earlier and exceeded analysts’ forecasts.
Inflation Revives Interest Rate Concerns
The September US inflation report has complicated expectations for the Federal Reserve’s next policy decision.
Traders briefly raised their expectations of an interest rate increase later this month after the data came in hotter than anticipated. However, the market subsequently scaled back those bets.
The CME Group’s FedWatch tool showed a 75 per cent implied probability that the Federal Reserve would leave rates unchanged at the conclusion of its two-day meeting on October 28, compared with a 25 per cent probability of an increase.
The uncertainty over monetary policy has added pressure to technology companies, which often rely on substantial capital investment to expand their operations.
Government bonds benefited from the shift in investor sentiment. The yield on the US 10-year Treasury fell 8.2 basis points to 5.106 per cent as demand for safer assets increased.
The decline in yields, despite the stronger inflation figures, suggested that some investors were becoming more concerned about the implications of the technology sell-off for economic growth.
European markets also faced losses in early trading. Futures linked to the broader regional market fell 0.9 per cent, while Germany’s DAX futures slipped 0.6 per cent and Britain’s FTSE futures declined 0.2 per cent.
Australian Jobs Data Weighs on Currency
Currency markets reflected the shifting outlook for interest rates and economic growth.
The US dollar weakened 0.2 per cent against the Japanese yen to 157.975 yen, while the euro gained 0.5 per cent to $1.1211.
The Australian dollar fell 0.3 per cent to $0.6954 after employment data showed the country lost 39,300 jobs in September. Economists had expected employment to increase by 20,000, making the unexpected decline a further source of concern for investors.
Market participants were also monitoring comments from Federal Reserve officials attending meetings in Bangkok, including Chair Kevin Warsh, for further indications of the central bank’s policy direction.
US producer price and retail sales figures due later on Thursday were expected to provide additional information about inflationary pressures and the strength of consumer demand.
In commodity markets, Brent crude fell 1.3 per cent to $104.71 a barrel as traders assessed the potential impact of US sanctions relief on oil supplies against continuing attacks on shipping through the Strait of Hormuz.
The competing pressures left investors weighing the outlook for inflation, interest rates and global growth, with technology companies facing particular scrutiny over the cost and financial risks of the AI infrastructure boom.
