A widespread sell-off of semiconductor stocks pulled most major Asian equity markets lower on Thursday, while U.S. futures held steady following mild losses on Wall Street a day earlier. Oil benchmarks also dropped as traders priced in growing hopes for a diplomatic resolution to the Iran conflict that could unlock key global energy supplies.
South Korea’s Kospi index, one of the markets most heavily exposed to global semiconductor production, led the downturn with a sharp 5.1% drop to close at 7,877.45. Top memory chip manufacturer SK Hynix shed 7.7% of its value, while industry giant Samsung Electronics fell 6.4%. In Japan, the Nikkei 225 declined 1.5% to 69,443.16, with leading chip equipment producer Tokyo Electron losing 5.6% of its share value. Taiwan’s Taiex index slipped 1.1% as the world’s largest contract chipmaker TSMC (Taiwan Semiconductor Manufacturing Corp.) dropped 1.8%.
Outliers in the region included Hong Kong’s Hang Seng Index, which gained 0.8% to reach 23,060.63, lifted by an 8.7% jump in shares of Chinese electric vehicle manufacturer BYD. The surge came after BYD reported a second consecutive month of rising sales. Mainland China’s Shanghai Composite Index bucked the positive trend in Hong Kong, falling 0.9% to 4,075.58. Australia’s S&P/ASX 200 edged 0.1% lower to 8,710.30, while India’s Sensex closed 0.5% higher.
The chip stock sell-off was triggered by shifting investor sentiment around artificial intelligence, which had driven massive gains for tech and semiconductor stocks across East Asian markets over the first half of the year. Year-to-date, the Kospi has climbed roughly 85% and the Nikkei 225 has gained 34%, fueled by surging demand for AI-enabled chips and components. But growing concerns that massive investments from large U.S. and global tech firms will create a supply glut have started to dampen market enthusiasm.
The downturn began on Wednesday, when chip stocks fell across U.S. markets. Memory chip producer Micron Technology dropped 10.6%, Intel fell 9%, Advanced Micro Devices (AMD) declined 6.9%, Broadcom lost 2.2%, and sector leader Nvidia slipped 1.3%. On Wednesday, Wall Street’s benchmark S&P 500 fell 0.2% to 7,483.23, the Dow Jones Industrial Average dipped less than 0.1% to 52,305.24, and the technology-focused Nasdaq composite dropped 0.7% to 26,040.03.
Analysts at Capital Economics note that while AI demand is still growing, it may expand far more slowly than many investors and firms currently project. In a research note published Thursday, economists Megan Fisher and Vicky Redwood pointed out that many stakeholders are underestimating the practical barriers to widespread AI adoption across industries. Even though AI is a transformative technology that will see broad adoption over time, it may not deliver the rapid financial returns needed to justify the massive scale of current investment being poured into the sector, they added.
In energy markets, crude oil prices fell early Thursday, dipping below levels recorded before the outbreak of the Iran war in late February. The drop came after U.S. and Iranian negotiators held separate talks with Qatari and Pakistani mediators this week, spurring new hopes for a permanent ceasefire deal. A resolution would likely allow for a major increase in global oil supplies by reopening the Strait of Hormuz, the critical global oil chokepoint that has seen limited traffic since the war began. As of Thursday trading, Brent crude, the global benchmark, fell 1% to $70.89 per barrel, down from roughly $72 per barrel before the war started. U.S. benchmark crude also dropped 1% to $67.91 per barrel.
In currency markets, the U.S. dollar dipped slightly against the Japanese yen to 162.39 yen, down from 162.58 yen a day earlier, after the yen hit a four-decade low against the greenback on Wednesday. The euro edged higher to $1.1387, up from $1.1377 in prior trading.