Asian technology stocks suffered a massive sell-off on October 15, with South Korea's KOSPI index plunging nearly 9% at one point and triggering its 10th circuit breaker this year, while Japan's Nikkei 225 index dropped about 5% and the MSCI Asia-Pacific index fell nearly 3%. The decline extended the weak performance of US technology stocks from the previous overnight session. Higher-than-expected US September inflation pushed up Federal Reserve rate hike expectations, while AI infrastructure financing risks, uncertain investment returns, and intensifying memory chip competition further weighed on technology stocks.
Hot US inflation deals an initial blow to global tech stock valuations
The US September Consumer Price Index rose 0.6% month-on-month, while core CPI rose 0.3%, both exceeding market expectations. Core CPI is the inflation measure that excludes food and energy, and it better reflects underlying inflationary pressure. Once the data was released, investors grew more concerned that inflation would not come down and that the Federal Reserve might continue tightening monetary policy. Market bets on a 25 basis point rate hike at the Fed's October 27-28 meeting briefly surged from 22.1% the previous day to 43.7%, before falling back to 31.6%; the probability of at least one more rate hike before 2027 has risen to 94.3%. In other words, current market pricing has essentially factored in at least one more 25 basis point rate hike by the Fed this year.
Rising rate hike expectations mean stock valuations need to be reassessed, especially for AI companies. AI companies are essentially "betting on the future," as they rely heavily on future earnings growth and require continuous large-scale capital investment. When interest rates rise, future earnings are worth less when discounted back to today, and corporate financing costs may also be higher. The previously high valuations built on strong growth expectations will naturally face greater pressure. US stocks had already fallen first overnight, with the Nasdaq Composite closing down 1.9%, and the Philadelphia Semiconductor Index declining for a sixth consecutive trading day, marking its longest losing streak since May 2025. During Thursday's Asian trading session, Nasdaq 100 index futures fell further by about 1%.
AI financing risks exposed in concentrated fashion, market begins reassessing massive capital expenditure
Beyond interest rate factors, investor concerns about the returns on AI infrastructure investment and the sustainability of financing are intensifying. Broadcom CEO Hock Tan previously warned that some AI investors are effectively making speculative bets, prompting the market to re-examine the scale of AI infrastructure investment and future returns. With related companies' valuations already containing high growth expectations, any negative changes regarding financing costs, revenue growth, or returns on capital expenditure could trigger concentrated selling and further amplify stock price volatility. In other words, any minor disturbance could trigger an emotional stampede.
AI cloud computing company CoreWeave became a typical case of this risk. The company's stock price plunged 17% at one point on Wednesday, and its bonds maturing in 2032 traded below 78% of face value, while investors who bought these bonds four months ago paid face value. The simultaneous pressure on both stock and bond prices shows that market concerns have extended from equity valuations to corporate debt financing and repayment risks. Meanwhile, Anthropic announced third-quarter revenue of $16.8 billion, up 45% quarter-on-quarter, and said it had achieved adjusted profitability, but this revenue level is reportedly still below some investors' expectations. This reflects the valuation pressure currently facing the AI industry: even if companies maintain relatively fast revenue growth, the market still demands that they deliver on the growth expectations previously implied in high valuations and prove that continuously expanding infrastructure investment can generate sufficient revenue and cash flow.
South Korean semiconductor giants lead declines, KOSPI triggers 10th circuit breaker this year
Against the backdrop of overall valuation pressure on technology stocks, Asian semiconductor companies became the main target of this round of selling. South Korea's KOSPI index fell to 5,483.65 points at one point, hitting a nearly three-month low and triggering the market circuit breaker mechanism. This was the 10th circuit breaker triggered by the index this year and the 16th on record, with the previous one occurring on July 29. Among individual stocks, South Korea's SK Hynix fell 11.4% at one point, Samsung Electronics dropped 10.6%, and LG Innotek declined about 10%; Japanese memory chip manufacturer Kioxia fell 12.2%. Because large semiconductor companies carry significant weight in the South Korean stock market, the collective plunge in related stocks further amplified the overall index decline. Japan's Nikkei 225 index fell about 5% during the same period, reflecting that selling pressure has spread from the US technology sector to major semiconductor and technology stock markets in Asia.
This Asian technology stock sell-off presents a dual pressure: at the macroeconomic level, US inflation is driving up rate expectations and suppressing technology stock valuations; at the industry level, the returns and financing risks of AI infrastructure investment are being scrutinized, prompting investors to reassess the growth expectations of related companies. Among them, the South Korean stock market, which has a high weighting of semiconductor companies, has been hit particularly hard.
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