Asia’s technology stocks suffered their sharpest drop since April last week, rattling investors and reviving concerns that the region’s scorching rally in artificial intelligence (AI) and semiconductor shares may be nearing a short-term peak, Bloomberg reported.
The selloff, triggered by a tech-led slump on Wall Street, exposed fragilities beneath the surface from stretched valuations and a narrow rally to uncertainties over US interest rate cuts. The MSCI Asia technology index slid as much as 4.2 per cent on Wednesday, while South Korea’s Kospi and Japan’s Nikkei 225 each tumbled more than 4 per cent, led by heavy losses in major chip suppliers like SK Hynix Inc. and Advantest Corp., both down roughly 10 per cent.
Despite those concerns, Asia’s tech sector has outperformed its US peers in 2025, boosted by cheaper valuations and excitement around China’s AI breakthroughs, notably DeepSeek. The MSCI Asia Pacific Index is up 24 per cent this year, poised to outperform the S&P 500 by the widest margin in 16 years. But that strength has fueled fears of overheating: South Korea’s stock exchange recently warned about risks from SK Hynix’s 200 per cent rally this year.
Analysts say Asia’s steeper declines reflect the region’s concentrated benchmarks. Taiwan Semiconductor Manufacturing Co. now makes up more than 40 per cent of Taiwan’s Taiex, while Samsung Electronics Co. and SK Hynix together account for about 30 per cent of South Korea’s Kospi. Japan’s Nikkei 225 is similarly top-heavy, with its five largest companies comprising nearly 38 per cent of the index.
A stronger US dollar and fading expectations of near-term Federal Reserve rate cuts have also pressured Asian chipmakers, pulling funds back toward US assets. Still, some traders view the decline as a natural pause.
Even after the correction, Asian chip valuations remain attractive. Bloomberg’s regional semiconductor gauge trades around 18 times forward earnings, far below the Philadelphia Semiconductor Index’s 28 times. Yet, some institutional investors are turning cautious. |
