Asian Markets Decline Amid AI Sector Concerns

Kuwait City, Kuwait Jul 16, 2026 ALN: Most Asian stocks sank on Thursday as tech firms came under renewed pressure from worries over the AI boom, with Seoul again taking the brunt of the selling. Regional investors were unable to build on a second day of gains on Wall Street, where more data showing inflation easing pushed back bets on a Federal Reserve interest rate hike to later in the year.

Seoul’s Kospi dived more than six percent as chip titan SK hynix shed more than 11 percent amid growing anxiety that the AI rally—which had pushed both firms to record highs this year—has run its course. This decline in the Kospi is particularly notable as it reflects broader concerns about the sustainability of the tech sector's growth, especially in light of the significant investments made in artificial intelligence technology over the past few years.

Traders are questioning whether the vast sums pumped into the AI sector in recent years can vindicate the eye-watering valuations for some firms. The skepticism surrounding the tech sector is heightened by recent reports from major industry players. For instance, Dutch giant ASML, which manufactures cutting-edge machines for chip production, reported a rise in second-quarter net profit and raised its sales forecast for the full year. Similarly, TSMC announced that its net profit soared more than 77 percent to a record high in the second quarter, driven by massive demand for AI hardware. TSMC’s commitment to invest an additional US$100 billion in Arizona reflects the ongoing demand for semiconductor manufacturing, but it also raises questions about whether such investments can continue to justify current market valuations.

While investors remain confident in the outlook for the AI sector, analysts noted that the trade has become too crowded. Stephen Innes of SPI Asset Management pointed out that the Philadelphia Semiconductor Index had risen roughly 83 percent this year, leading to stretched valuations. Such a rapid increase in stock prices often leads to market corrections, as investors begin to question whether the anticipated growth justifies current prices. Innes emphasized that strong earnings and healthy demand can sustain a trade, but they cannot prevent a correction when the market is saturated with investors holding similar positions.

"Strong earnings and healthy demand can keep a trade alive, but they cannot prevent a correction when everyone already owns it," Innes remarked. He elaborated that investors are not questioning the existence of AI infrastructure demand but rather how much of that demand has already been factored into share prices. This creates a precarious situation where even positive earnings reports may not be enough to support stock prices if expectations have already been pushed too high.

Elsewhere in Asia, Tokyo—home to many tech firms—suffered heavy selling, while Shanghai, Singapore, and Wellington also experienced declines. Taipei and Sydney were marginally lower. However, Hong Kong was an outlier, climbing more than one percent as Chinese chip firms, which have faced significant challenges this year, enjoyed another advance. Gains were also noted in Manila, Mumbai, Bangkok, and Jakarta, indicating a mixed performance across the region.

The weak performances in Asia came even after all three main indexes in New York ended higher, buoyed by substantial gains in tech giants including Apple, Amazon, and Facebook parent Meta. The disparity between Asian markets and the US reflects a complex interplay of local and global economic factors. Investors in Asia may be reacting more cautiously to the potential for a market correction, while US markets continue to show resilience amidst strong earnings reports.

This divergence in market performance also coincides with economic indicators that have eased concerns about inflation in the United States. Recent figures showed that US producer prices slipped 0.3 percent on a month-to-month basis in June, attributed to lower energy prices. Additionally, a truce between the US and Iran to reopen the Strait of Hormuz has allowed crude oil to flow, further alleviating concerns about energy prices. Data from earlier in the week indicated that consumer prices rose less than expected, contributing to a more optimistic outlook for monetary policy.

Despite these positive developments, analysts caution that renewed hostilities between the US and Iran could undermine the progress made in stabilizing oil prices. Crude prices have ticked down, but traders remain on edge as traffic through the Strait of Hormuz, a critical passage for a fifth of the world’s oil and liquefied natural gas, has thinned.

On currency markets, the South Korean won strengthened slightly against the dollar after the country’s central bank hiked interest rates for the first time since 2023, aiming to tackle stubborn inflation and support an economy buoyed by strong chip exports. This move by the Bank of Korea reflects a growing recognition of the need to manage inflationary pressures while also supporting economic growth through strategic investments in key sectors.

In the UK, the pound edged back after rising more than one percent against the dollar on Wednesday, following reports that Home Secretary Shabana Mahmood is a frontrunner to become the next finance minister. This potential leadership change could have significant implications for economic policy and market sentiment in the UK, particularly as the country navigates its post-Brexit economic landscape.

Key figures around 0715 GMT

West Texas Intermediate: DOWN 0.2 percent at $79.43 a barrel

Brent North Sea Crude: DOWN 0.5 percent at $84.56 a barrel

Tokyo - Nikkei 225: DOWN 2.8 percent at 66,835.54 (close)

Seoul - Kospi: DOWN 6.4 percent at 6,820.60 (close)

Hong Kong - Hang Seng Index: UP 1.4 percent at 25,037.30

Shanghai - Composite: DOWN 1.9 percent at 3,882.41 (close)

London - FTSE 100: DOWN 0.6 percent at 10,450.83

Pound/dollar: DOWN at $1.3470 from $1.3530

Euro/pound: DOWN at 84.71 pence from 84.72 pence

Euro/dollar: UP at $1.1469 from $1.1463 on Wednesday

Dollar/yen: DOWN at 162.09 yen from 162.27 yen.