BANGKOK – Global financial markets faced significant downward pressure on Friday, led by a sharp sell-off across Asian exchanges that was triggered by plummeting valuations in artificial intelligence-linked stocks and amplified by growing geopolitical tensions in the Middle East.
Tokyo’s benchmark Nikkei 225 bore the brunt of the selling, closing down 5.8% at 62,945.97, a drop of more than 5 percentage points that saw AI and semiconductor stocks leading the decline. While South Korean markets were closed for trading Friday, Taiwan’s key index also fell by more than 5%, mirroring the downward trend across East Asian financial hubs. Other major Asian indexes also recorded notable losses: Hong Kong’s Hang Seng Index shed 2% to settle at 24,514.29, mainland China’s Shanghai Composite dropped 1.6% to 3,818.59, and Australia’s S&P/ASX 200 edged 0.7% lower to close at 8,775.70.
The sell-off in AI-related equities is not an isolated one-day event. For weeks, the sector has faced growing downward pressure as investors increasingly question the stretched valuations that have propelled AI stocks to historic gains over the past year. Core concerns center on whether the explosive rally in chipmakers and AI infrastructure providers is justified, with market participants weighing the risk that projected demand for semiconductors, memory chips, and AI processing hardware may not hold up if the sector fails to deliver the outsized profits and productivity gains that have been widely promised to investors.
The market downturn was compounded by a sharp spike in global crude oil prices, which climbed to near one-month highs Friday amid intensifying military conflict in the Middle East. Fears are growing that escalating tensions involving Iran could disrupt shipping through the Strait of Hormuz, a critical chokepoint through which a large share of global crude oil exports from the Persian Gulf pass. A closure or disruption to shipping through the strait would cut off global supply and push energy prices even higher. On Friday, international benchmark Brent crude rose 1.1% to settle at $85.13 per barrel, while U.S. benchmark West Texas Intermediate crude climbed 1.3% to $79.95 per barrel. U.S. stock futures also edged lower in pre-market trading following the Asian session.
The downward momentum for AI stocks carried over from Wall Street’s previous trading session. On Thursday, the Nasdaq Composite, which is heavily weighted toward technology and AI stocks, dropped 1.5% even as a majority of S&P 500 components recorded gains. The S&P 500 overall fell 0.5%, while the Dow Jones Industrial Average dipped 0.2%, despite better-than-expected quarterly earnings from roughly three-quarters of the large U.S. companies that reported results this season.
Industry giant Nvidia, the biggest single driver of the global AI stock rally over the past two years, fell 2.4% on Thursday, making it the largest single drag on the S&P 500 and erasing some of the stock’s stellar year-to-date gains. Other major semiconductor and memory chip firms also suffered steep losses: Micron Technology dropped 5.6%, pulling its 2024 gain below 199%; Western Digital sank 9.2% but remains up 171% for the year; and SanDisk plummeted 12.6%, even with its year-to-date gain still holding at 494%.