Asian tech shares plunge as US inflation fuels rate fears
Chip and technology shares fell sharply across Asia after rising US inflation revived concerns that the Federal Reserve may raise interest rates soon. The sell-off highlights investor worries about the outlook for AI-related spending and the pressure that higher borrowing costs could put on growth-focused companies.
South Korea’s KOSPI dropped more than 8%, with Samsung Electronics down 9% and SK Hynix 10.5%; Japan’s Nikkei fell 4.5%. On Wednesday, the S&P 500 lost 1.1% and the Nasdaq 1.9%, while Dell shares plunged 11% amid questions about whether AI investment will pay off. US inflation reached 3.7%, and UK GDP figures for August were due later, with a monthly fall of 0.1% expected after strong growth in July.
- Chip shares plunged as investors reassessed AI prospects.
- US inflation rose to 3.7%, fuelling rate concerns.
- UK August GDP was expected to fall 0.1%.
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The Federal Reserve is the US central bank, which sets interest rates to help control inflation and support the economy. Higher rates make borrowing more expensive and can weigh on company investment and share prices, especially for businesses whose expected growth lies well in the future.
Asian technology markets include major chipmakers such as South Korea’s Samsung Electronics and SK Hynix, which supply components used in computers and AI systems. Their fortunes are tied partly to demand for chips and to how much businesses spend on artificial intelligence.
Investors are weighing the potential returns from AI investment against its cost and uncertainty. Changes in US interest rate expectations can affect markets well beyond the United States because companies and investors operate across global markets.
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The case for
Investors may reasonably see the sell-off as a reassessment of risk: persistent inflation could keep interest rates higher, raising financing costs and reducing the value of expected future earnings. Questions about whether heavy AI spending will generate lasting returns also make it prudent to scrutinise valuations, particularly for growth-focused technology firms.
The case against
A sharp market fall may overstate what one inflation reading says about the longer-term outlook, and higher rates are not certain to follow. AI investment could still support substantial future productivity and earnings, so treating near-term uncertainty as evidence that the spending will not pay off risks overlooking companies’ long-term prospects.
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Originally published by The Guardian as “Tech stock sell-off intensifies as markets await UK GDP report for August – business live”.