Asian Markets Tumble on Tech Rout
On Tuesday, declines in Asia were deepest in Seoul, Tokyo and Taipei, where tech shares sold off hard on renewed doubts about how the AI spending wave will pay off. South Korea's Kospi slumped over six percent, with memory chip heavyweights SK hynix and Samsung among the worst hit, after media accounts said China's CXMT had advanced work on technology that raises memory density. Those accounts added that CXMT aimed to bring out a server-memory product built on that design before the year ends.[S1][S2][S3]
Tokyo's market also weakened sharply, with the Nikkei 225 down almost three percent. Chipmaker Kioxia sank over 12 percent, while Tokyo Electron and Advantest each shed more than six percent. In Taipei, a 1.8 percent slide in TSMC pulled the index down by over two percent. Hong Kong, Shanghai, Sydney, Wellington and Manila all posted notable declines as well.[S1]
AI Investment Concerns and China Competition
Worldwide technology shares had been gradually climbing back from a summertime slump that erased trillions in market value, driven by worries over rich valuations and uncertainty about when heavy spending would start paying off. The latest falls tracked steep losses in New York, where SanDisk dropped six percent and Micron Technology lost 3.9 percent. Broadcom chief executive Hock Tan added to the nervous mood, comparing the recent rush of investor buying tied to AI to gambling, saying many buyers lack understanding of what they hold and build outsized hopes, only to feel as though they are in a casino.[S1]
Tan further cautioned that the sector has yet to settle on a workable business model, noting that ChatGPT developer OpenAI has posted losses running into the billions. In his view, the company is still unprofitable because of heavy training outlays, and at this stage that reveals little beyond the prospect of substantial revenue growth from offering cutting-edge generative AI models. OpenAI's disclosure of $50 billion in annualised revenue in September pointed to a workable model, yet gave only limited assurance over the longer run.[S1]
Chris Weston of Pepperstone observed that China keeps closing the competitive distance to American firms in AI models, humanoid robotics, memory and other segments of the technology supply chain. He argued that China's capacity to turn out ever more competitive goods at lower cost is unsettling long-held beliefs about market share, pricing power and how long margins can hold up. Weston also noted that the financing needs underpinning the AI buildout are drawing growing attention from investors, especially as capital intensity and future returns come under scrutiny.[S1]
Oil Prices Drop Amid Middle East Tensions
The equity slump drew attention away from falling crude prices, which declined even as Yemen's Houthis intensify strikes on Saudi Arabia, heightening Middle East tensions and adding to worries over supply. Dealers are monitoring the region after powerful blasts shook Riyadh on Monday night, following days of Houthi attacks on the capital's airport that have killed at least 18 people. A Houthi official warned Monday that the US would face a painful response if it joined the Yemen war, after Saudi Arabia was reported to have sought Washington's assistance against the group.[S1]
Yemen's civil war, in which a Saudi-led coalition backs the government against the Iran-supported Houthis, flared up again in July, months into the broader regional conflict that has unsettled energy markets and thrown the Middle East into turmoil. The Houthis soon started striking Saudi oil installations, tankers and transport hubs, among them a series of deadly attacks on Riyadh's airport, shaking the world's largest oil exporter. Even so, both benchmark crude contracts fell more than one percent Tuesday, with Brent still holding above $100 and keeping steady upward pressure on worldwide inflation.[S1]
Market Data and Earnings Outlook
Investors now await results from major technology companies due this month and next, seeking clues on their AI prospects given climbing borrowing costs and recent market swings. By the numbers, Seoul's Kospi lost 6.3 percent to 5,979.19, Tokyo's Nikkei 225 shed 2.5 percent to 67,292.39, Hong Kong's Hang Seng Index slipped 0.9 percent to 24,046.21, and Shanghai's Composite eased 0.8 percent to 3,766.18. West Texas Intermediate declined 1.2 percent to $92.66 a barrel, and Brent North Sea crude fell 1.1 percent to $105.52. The euro strengthened to $1.1171 from $1.1156, sterling rose to $1.3218 from $1.3207, the dollar weakened to 158.31 yen from 158.68 yen, and the euro climbed to 84.51 pence from 84.48 pence. In New York, the Dow added 0.4 percent to 51,850.55, while London's FTSE 100 advanced 1.0 percent to 10,656.28.[S1]
