Asian tech shares plunge as US inflation fuels rate fears
Developed over time first seen 6 hours ago
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.
Full account
Asian technology shares fell sharply on Thursday after a stronger than expected US inflation reading raised fears that interest rates could rise again. Chipmakers and companies linked to artificial intelligence were among the hardest hit, as investors reassessed the cost of financing and the returns they expect from spending on AI.
In South Korea, heavy losses in memory chip stocks helped drive the benchmark market down by more than 8%. Samsung Electronics fell by roughly 9% and SK Hynix by more than 10%. The sell-off spread to Japan, where the Nikkei 225 lost around 5%. Kioxia, which makes memory chips, and SoftBank, a major technology investor, both recorded steep falls.
The moves followed losses on Wall Street on Wednesday. The technology-focused Nasdaq Composite declined 1.9%, while the broader S&P 500 fell 1.1%. US consumer price inflation had reached 3.7% in September, above expectations. Investors took the figure as a sign that the Federal Reserve might raise rates again, potentially as soon as its next meeting. Analysts cited in the reports were particularly concerned that price increases extended across a range of goods and services, rather than being confined to energy.
The inflation figures added to unease about whether the substantial sums being invested in AI will deliver sufficient returns. Shares in Dell also fell sharply in the US session. One report described further declines in China and Taiwan and cited an International Monetary Fund warning that a correction in AI shares could affect markets worldwide. The immediate pressure, however, was most visible in Asian markets with large chipmaking and technology sectors.
Where outlets differ
The first report describes South Korea’s broader KOSPI as falling by more than 8% and gives a late-trading Nikkei decline of 4.5%. The second identifies the Kospi 200, reports an 8.1% closing fall and puts the Nikkei’s decline at 4.9%.
The first report focuses on the initial market moves and forthcoming economic data. The second adds circuit breakers in South Korea, losses in China and Taiwan, and the IMF’s warning about the wider effects of an AI share price correction.
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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”.