Asian Chip Selloff Sends Markets Tumbling as AI Oversupply Concerns Force Tech Correction

Asian Chip Selloff Sends Markets Tumbling as AI Oversupply Concerns Force Tech Correction​

Asian stock markets registered a correction for the first time in four days, driven by heavy selling in chipmakers. The selloff revived growing concerns that the sustained rally fueled by artificial intelligence infrastructure might have moved too quickly and rapidly. Key companies experienced significant dips, pulling down regional indices.

South Korea’s Kospi index fell nearly 6%, leading to a 1.2% drop in the MSCI Asia Pacific Index. In Seoul, SK Hynix Inc. and Samsung Electronics Co. both tumbled by more than 8%. Kioxia Holdings Corp. also saw a sharp decline of 14% in Japan after it had posted gains exceeding 650% this year.

Technology Sector Under Pressure Amid AI Concerns​

A wave of developments weighed heavily on the global technology sector sentiment. News surfaced that Meta Platforms Inc. is developing plans for a cloud infrastructure business, which would involve selling access to AI computing power and models. This move fueled worries that the company may have significantly overbuilt its capacity in this area.

Furthermore, Apple’s negotiations to purchase chips from two Chinese semiconductor makers raised anxieties about market competition. These developments suggested that the competitive advantage held by giants like Samsung Electronics and SK Hynix could be eroding.

Global Markets: Oil Dips as Fed Chief Calms Inflation Fears​

Meanwhile, markets found some stabilizing elements amidst the technology turbulence. Crude oil continued its decline, with Brent falling 0.8% to $71 a barrel. This represented the lowest level since February 26, as flows through the Strait of Hormuz increased.

Gold rallied for the second consecutive day after Federal Reserve Chairman Kevin Warsh commented on inflation risks. He stated that price risks have moderated in recent weeks. Speaking at the European Central Bank’s annual forum in Sintra, Portugal, Warsh repeated his commitment to bringing inflation back to the US central bank's 2% target.

US Economy Shows Resilience Amid Policy Outlook Shifts​

The US manufacturing sector expanded for a sixth straight month in June, indicating continued economic resilience. This growth arrived as the surge of input costs related to the war eased. Printing, electrical equipment and textiles were among the sectors leading gains.

Eugenio Aleman, chief economist at Raymond James, commented that the report points to ongoing strength across the manufacturing sector. He supported the view that the US economy is reaccelerating, with growth staying on track to reach approximately 2.4% this year.

Geopolitical Talks Progress as Iran Peace Efforts Continue​

In international affairs, positive discussions were reported between US negotiators Steve Witkoff and Jared Kushner in Qatar. These talks are progressing on technical matters concerning a potential peace deal with Iran, according to a senior administration official.

Working groups have been established by Tehran to discuss the implementation of the current agreement and negotiate a final resolution. Mohit Kumar of Jefferies remarked that they are optimistic regarding geopolitics. He added that as long as the Strait remains open and oil keeps flowing, the market is likely to become de-sensitized around geopolitical volatility.

Market Focus Shifts to US Jobs Report​

While semiconductor stocks continued to drive negative sentiment in equities markets, investor comfort was found in Warsh's remarks and comments from other central bankers. These remarks suggest that inflation risks have become more balanced globally.

Krishna Guha at Evercore noted that the Fed chair’s comments provided no fuel for immediate speculation of a July rate hike. Attention now turns toward the crucial US jobs report due on Thursday, which is expected to provide fresh signals regarding the policy outlook.