Asian technology markets faced a severe downturn on Friday, as escalating fears of an artificial intelligence bubble triggered a massive selloff. The plunge mirrored a pessimistic session on Wall Street, where robust US jobs data dampened hopes for interest rate cuts and raised questions about the sustainability of sky-high AI stock valuations.
Major Indexes and Tech Giants Take a Hit
The selling pressure was intense across the board. Japan's SoftBank Group, a heavyweight tech investor and major backer of ChatGPT creator OpenAI, witnessed a staggering decline of more than 10 percent during early trading. This sent shockwaves through the regional markets.
In South Korea, the benchmark Kospi index dropped nearly four percent. The tech-heavy selloff hit the nation's semiconductor champions hard. Samsung Electronics sank 4.8 percent, while its rival SK hynix plunged over nine percent. These two firms are critical global players in memory chip manufacturing, a sector central to the AI boom. Meanwhile, Tokyo's Nikkei index shed 2.3 percent in morning trade, confirming a broad-based regional retreat.
The Nvidia Rollercoaster and AI Bubble Concerns
This sharp correction arrived just one day after a market rally fueled by an outstanding earnings report from Nvidia, the undisputed AI bellwether. The company's results, which surpassed expectations due to fierce demand for its advanced chips, had initially buoyed investor sentiment. Despite the positive news, Nvidia's CEO Jensen Huang had previously dismissed fears of an AI bubble.
Nvidia, whose hardware is essential for training powerful generative AI systems, recently became the world's first company to achieve a valuation above $5 trillion, though its market capitalisation has since pulled back to around $4.4 trillion. The multibillion-dollar global investment rush into AI has been a primary driver behind record-high valuations in technology equities.
Analysts pointed to the fragile market psychology. Han Ji-young, an analyst from Kiwoom Securities, noted, "For now, movements in the domestic (South Korean) market are inevitably tied to day swings in US tech stocks, including Nasdaq futures and Nvidia's after-hours trading." He added, "Nvidia's earnings were undeniably a surprise, but in a time of heightened short-term volatility, even strong catalysts struggle to generate meaningful upside."
Massive Investments and Geopolitical Drivers
The scale of anticipated AI spending is monumental. According to US research firm Gartner, AI-related expenditure is projected to reach roughly $1.5 trillion by 2025, and exceed $2 trillion in 2026. This staggering sum would account for nearly two percent of the entire global gross domestic product.
Geopolitical tensions are also accelerating this frenzy, primarily to construct massive data centres that house tens of thousands of expensive AI chips. These facilities require phenomenal electrical power and energy-intensive cooling systems. In a notable collaboration, SoftBank, OpenAI, and cloud giant Oracle are jointly leading the ambitious $500 billion Stargate project. This initiative, announced by former President Donald Trump in January, aims to build extensive AI infrastructure in the United States.
Commenting on the sudden market reversal, Stephen Innes of SPI Asset Management stated there was no single catalyst. "What we saw was the market hitting a psychological air pocket -- the kind of reversal every veteran trader has lived through, yet cannot reasonably quantify or make sense of in real time," he explained. "Japan, Korea, Australia all opened on the defensive, with traders fully aware that the Nvidia-led optimism evaporated before the US lunch hour." This episode highlights the extreme volatility and heightened sensitivity currently characterising the global tech sector.
