Asian markets dropped again on Friday, following a sharp sell-off on Wall Street the day before that raised doubts about returns from artificial intelligence investments.
The MSCI Asia Pacific Index slipped 1%, with Japan's Nikkei 225 plunging 2.79% and the Kospi down 5.71%. Hong Kong’s Hang Seng and China’s Shanghai Composite also fell, losing 1.36% and 1.10% respectively, while Australia’s S&P/ASX 200 dropped 0.6%.
Technology stocks bore the brunt of the declines. Shares of Samsung Electronics, SK Hynix, and Kioxia plunged over 3% amid growing skepticism about whether massive AI spending will yield adequate returns, a sentiment reinforced by a recent tech sell-off reported by the Wall Street Journal.
Gerald Gan, CIO of Reed Capital, noted that investors are increasingly uneasy about sustaining the recent rally in AI-related stocks. Yet, he suggested any short-term correction might attract new buyers if the long-term outlook remains positive.
Adding to market pressure, Brent crude oil prices hovered above $100 a barrel amid escalating Middle East tensions. The spike in oil followed threats of further U.S. action against Iran after Houthi attacks targeted Saudi oil tankers in the Red Sea.
Higher oil costs pushed U.S. Treasury prices down and strengthened the dollar as fears of persistent inflation grew. Investors now fully expect the Federal Reserve to raise interest rates by September, complicating the outlook ahead of the next policy meeting.
Sameer Samana from Wells Fargo Investment Institute warned that ongoing Middle East instability could delay rate relief or even force additional tightening if inflation accelerates.
Market watchers are closely following signals from the Fed, corporate earnings reports, and geopolitical developments to judge if Asia’s downturn is a short-term pullback or the start of a deeper correction.
This material is informational and not financial advice.
