Stocks Drop as Oil Slips and a Chip Selloff Hits Kospi – Asia Market Wrap

Semiconductor stocks tumbled across Asia, dragging regional equities lower as investors grew more skeptical that the AI-driven rally can withstand lofty valuations, while oil slipped. South Korea’s Kospi, a bellwether for AI investments, slumped as much as 7.6%, with SK Hynix and Samsung leading losses ahead of a holiday in Seoul Friday. A 2.9% drop in Japan’s Nikkei 225 compounded the selloff, dragging MSCI’s Asia Pacific equities gauge down 1.3% and ending a two-day winning streak.

Sentiment steadied as US equity-index futures edged 0.1% higher and contracts indicated a modest gain for European shares. Brent erased an earlier advance triggered by fresh US airstrikes on Iran, falling 0.5% to $84.50/bbl after a three-day rally.

The durability of the AI rally remains in focus as earnings season tests lofty chip-sector valuations following a blistering advance earlier this year. While bouts of profit-taking are typical after such gains — the Kospi has surged more than 60% this year — investors are watching closely for signs of slowing demand for AI infrastructure or weaker-than-expected guidance.

Elsewhere, a measure of the Pound’s strength rose to its highest level in a year on Wednesday following reports that incoming UK Prime Minister Burnham will name Shabana Mahmood as his Chancellor of the Exchequer.