Technology companies led a significant market downturn across Asia on Friday, with major indices falling as much as 3.2% as investors grappled with persistent fears about an artificial intelligence bubble and disappointing US economic data.
Major Tech Players Suffer Heavy Losses
The sell-off hit technology giants particularly hard, with Japanese investment titan SoftBank plunging more than 10% during morning trading in Tokyo. The carnage extended across the region's semiconductor sector, with Seoul-listed Samsung Electronics sinking nearly 5% and rival SK hynix dropping more than 9%. Taiwan's TSMC, another chip manufacturing leader, tanked nearly 4%.
This tech-led decline dragged broader markets lower, with Tokyo's Nikkei 225 falling 1.8%, Hong Kong's Hang Seng Index dropping 1.7%, and Shanghai's Composite declining 1.0%. Seoul, Sydney, and Taipei all recorded losses between 1.6% and 3.2%.
AI Bubble Concerns Override Nvidia Optimism
The market turmoil comes despite a blockbuster earnings report from chip industry leader Nvidia on Wednesday that initially calmed nerves about overinvestment in artificial intelligence. Nvidia CEO Jensen Huang had dismissed bubble fears during the earnings presentation, stating "From our vantage point, we see something very different."
However, the optimism proved short-lived as warnings multiplied that the technology-led rally across global equities—which had propelled several markets to record highs and companies to staggering valuations—may have exhausted its momentum. Analysts now suggest a market correction could be underway.
Chris Weston at Pepperstone noted, "The price action across markets has been prolific, and we've seen some truly impressive reversals in risk assets. Sentiment in so many markets remains highly challenged, and we've seen new evidence that managers are dumping their 2025 winners."
Broader Economic Pressures Mount
The technology sector's struggles were compounded by broader economic concerns. Wall Street had initially responded positively to Nvidia's results but later reversed sharply, with selling pressure intensifying due to worries about the US labor market.
Recent data showed that while September job creation remained strong, the unemployment rate crept higher. This development did little to change investor expectations that the Federal Reserve will maintain current borrowing costs at its next meeting, with officials remaining focused on persistently high inflation.
The risk-off sentiment extended to cryptocurrency markets, with bitcoin falling below $93,000 for the first time since April. This represents a significant retreat from the record high above $126,200 reached just last month.
Market analysts observe that investors have become increasingly sensitive to negative news. Weston added, "The market seems far more sensitive and ready to de-risk on emerging news, almost seeking reasons to take positioning down when that news could easily be seen as a positive in a more bullish set-up."
Attention is also turning to Japan, where speculation suggests Prime Minister Sanae Takaichi may unveil a substantial stimulus package worth approximately $130 billion to boost the struggling economy. However, government bond yields have surged recently on concerns that this spending will require additional borrowing, raising worries about Japan's fiscal health and putting further pressure on the yen.
The Japanese currency has fallen this week to its lowest level against the dollar since January, though it received modest support from data showing core inflation ticked up last month, potentially giving the Bank of Japan room to consider interest rate increases.
