Trading on South Korea’s Kospi index ground to a halt for the third time this week on Friday, as an 8% plunge triggered a circuit breaker designed to stop panic selling. The index ended the session 5.8% lower, capping a brutal week for Asian markets that have been swept up in a global tech rout.
The sell-off was led by technology firms, with investors fretting that recent jumps in share prices had gone too far. The jitters were sparked on Thursday when Apple shares dropped 6% — their biggest one-day fall in more than a year — after the company announced it would raise prices on iPads and MacBooks because of soaring computer chip costs. Microsoft also slid after it said it would charge more for its Xbox gaming consoles, blaming higher component prices.
“Asian markets plunged as tech shares slumped; South Korea's Kospi halted for third time this week.”
Those moves have raised fears that rising component costs could hit device sales, slowing demand for chips. At the same time, traders are reassessing the hundreds of billions of dollars that big tech firms are spending this year to build artificial intelligence infrastructure. “The long term investment case for AI remains compelling, but investors are becoming far more selective about which companies can justify the valuations the market has assigned to them,” said David Makaryan, senior partner at investment firm Alpha Pacific Group.
Elsewhere in Asia, Japan’s Nikkei 225 closed more than 4% lower as SoftBank, the technology investment giant, tumbled 12.5%. Other major indexes in Taiwan and mainland China also fell sharply. South Korea’s stock market has been especially volatile recently: Friday’s 20-minute halt marked the third time this week that the Kospi’s circuit breaker has been triggered and the fifth such event this year.
The reassessment of tech valuations comes as the high cost of commercialising AI tools is gradually being passed on to consumers. That “naturally raises questions” about how quickly demand for such tools will match the investment into AI, and whether the valuations of tech stocks today are realistic, said Raymond Woo, an analyst at Kyoto University Innovation Capital. With investors taking profits after months of rally, the region’s markets are now bracing for further volatility.