Concerns over excessive valuations of artificial intelligence (AI) concept stocks triggered a severe sell-off in Wall Street's semiconductor sector, with the panic rapidly spreading to Asia-Pacific markets. During the early trading session, Asia-Pacific stock markets were broadly under pressure, with the South Korean market being the hardest hit and triggering a circuit breaker mechanism. Concurrently, dovish signals from the Federal Reserve and the continued decline in international oil prices are reshaping global market risk appetite.
The selling wave in the Asia-Pacific market intensified rapidly in early trading. The South Korean KOSPI index opened 4.5% lower, with its intraday loss quickly widening to over 6%, breaching the 7,800-point level. As KOSPI 200 futures plummeted by 5%, the Korea Exchange activated a circuit breaker, halting program trading for five minutes. Heavyweight chip stocks led the market lower, following the overnight decline in US tech shares. SK hynix shares plunged 7.6% at the open, while Samsung Electronics fell 6.5%.
The decline was not confined to South Korea. Japan's Nikkei 225 index opened 0.6% lower, with its intraday loss expanding to 2%. The MSCI Asia Pacific Index fell 1% overall. The direct trigger for this regional slump was the overnight turbulence in the US stock market, where the US semiconductor stock index plunged 6.3% on Wednesday, and S&P 500 futures continued to fall 0.2% during the Asian session.
Meta's Strategic Shift Ignites Sell-Off
Meta's strategic pivot overnight was the core catalyst for yesterday's US stock market decline. Meta's plan to sell excess computing power shattered the belief in "absolute scarcity of computing power." Its stock surged 10% in a single day, marking its best performance of the year, while AI hardware like chips suffered heavy losses.
According to reports, Meta is establishing a new business unit planning to sell its surplus computing capacity to external customers for revenue. This strategic shift breaks the market's core belief in the absolute scarcity of computing power, signaling a turning point in market tolerance for unchecked capital expenditure by tech giants.
This news triggered extreme polarization in the secondary market. Meta's stock, which actively signaled cost-cutting, soared 10% for its best day of the year. In contrast, traditional AI hardware beneficiaries—semiconductor giants, memory chip makers, and emerging cloud service providers—faced a sharp sell-off. Star stocks like Nvidia and Micron encountered fierce selling, directly triggering a full-scale momentum strategy collapse.
Wall Street institutions widely interpret this as a major narrative shift in the AI investment cycle. Analysts warn that the market's core premise has been computing power scarcity; once supply increases and rental prices fall, the shortage narrative will be directly upended, with the hardware sector feeling the pain first. The focus of capital is rapidly shifting from pure hardware infrastructure build-out to corporate free cash flow stability and computing power utilization. Investors are beginning to materially reward tech giants demonstrating financial discipline.
AI Valuation Concerns Reshape Market Logic
Reports indicate growing market concerns that the AI-driven stock market rally has detached from fundamentals. This sentiment erupted in the overnight Wall Street session and directly dragged down the stock markets of Asian economies highly dependent on chip exports.
On the inflation front, the Bank of Korea stated in its latest morning remarks that the July CPI inflation rate would ease compared to June. However, it simultaneously warned that inflation is expected to remain elevated for some time. The marginal easing of domestic inflation pressure failed to counter the direct impact of external tech stock selling on capital markets.
Dovish Fed Signals Cool Rate Hike Expectations
Amid the stock market turmoil, the Federal Reserve's policy path became a key factor in stabilizing market sentiment. The Fed Chairman stated at the ECB's annual forum in Sintra, Portugal, that inflation expectations have moderated over the past month, and price risks have declined in recent weeks. He also reiterated the commitment to returning inflation to the 2% target.
This statement was interpreted by the market as a signal that the Fed is in no hurry to raise interest rates. Analysts noted that his comments, at a minimum, provided no fuel for speculation about a near-term July hike, suggesting the new Fed Chair currently sees no immediate reason for a rate increase, although he kept all options on the table for every meeting.
Resilient US economic data also provided support. US manufacturing expanded for a sixth consecutive month in June, with a moderation in the surge in input costs due to war. Printing, electrical equipment, and textiles led gains, while paper products, furniture, and wood products contracted.
Economists stated the report overall indicates sustained manufacturing resilience and supports the view that the US economy is re-accelerating, with growth this year still expected to be around 2.4%.
Market attention has now turned to Thursday's US jobs report. A chief market strategist noted that with the Fed Chair prioritizing inflation, the June non-farm payrolls data is "unlikely to change rate expectations on its own," adding that FIFA World Cup-related hiring is expected to distort the figures.
International Oil Prices Drop Significantly
The continued decline in the crude oil market provided some breathing room for global markets. Brent crude fell 0.8% to $71 per barrel, hitting its lowest level since US and Israeli strikes on Iran in late February. WTI crude also fell 1.1% to $67.80 per barrel.
The core driver behind the falling oil prices is positive developments in Middle East geopolitics. Reports citing US senior officials indicate US negotiators held positive discussions in Qatar, with technical talks with Iran making progress, as parties attempt to transform a provisional peace deal into a permanent end to the war.
An Iranian news agency quoted a deputy foreign minister stating Tehran has formed working groups to discuss implementing the current agreement and negotiating a final peace deal, though no talks have been held yet.
Analysts commented they are optimistic on the geopolitical front, noting that while a comprehensive deal may not be reached, a compromise is more likely. As long as the Strait remains open and oil continues to flow, markets may become less sensitive to geopolitics.
Additionally, gold held steady above the 4,000 level, rising slightly by 0.3%.
Tech Giants Accelerate Strategic Adjustments
Against the backdrop of macro and industry shocks, global tech giants are also accelerating business adjustments.
A global shortage of memory chips has forced Apple to raise prices across its product line. Meanwhile, Meta is formulating plans for a cloud infrastructure business to sell access to AI computing power and models. This move puts it in direct competition with industry leaders like Amazon Web Services, Microsoft Azure, and Google Cloud.
Furthermore, Google was ordered to pay nearly $2 billion to the Pricerunner unit of Klarna Group Plc for abusing its power in the comparison shopping service market.
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