Asian Tech Stocks Tumble, Market Tests AI Spending Endurance

Wall Street's technology stocks surge. (Wikimedia Commons - Carlos Delgado)  

JAKARTA - Asian technology stocks weakened on Thursday, following pressure on Wall Street. Investors are reassessing whether the rapid expansion of artificial intelligence or AI spending can still be maintained.

Anadolu Agency, quoted Thursday, August 6, reported that pressure was again emerging in AI-related stocks. The chip sector was one of the most affected.

In South Korea, SK Hynix shares fell 2.2 percent after plunging nearly 10 percent in early trade. Samsung Electronics fell 6.3 percent, while Seoul Semiconductor fell 3.7 percent.

Pressure was also seen in Japan. Shares of technology investment firm SoftBank Group fell 3.4 percent.

Tokyo Electron, a chip-making equipment maker, fell more than 5.4 percent. Advantest, a semiconductor test equipment maker, fell 2.6 percent. Kioxia, a memory chip maker, weakened 9.2 percent.

Taiwan Semiconductor Manufacturing Company or TSMC, the world's largest contract chipmaker, fell 1.66 percent.

The decline in Asia came after U.S. technology stocks weakened in overnight trading. Markets are still weighing whether fast-growing AI-related spending can continue.

Asian semiconductor stocks have moved sharply in recent sessions. The South Korean stock market, which is heavily supported by chip stocks, has alternated between large declines and record gains.

Semiconductors are a key component in electronic devices, including chips for computers, mobile phones, data centers, and AI systems.

According to CNBC, despite the increased volatility, JPMorgan believes the sell-off of technology stocks in the region has not disrupted the broader AI investment cycle.

Volatility is a condition when the price of an asset rises and falls sharply in a short time.

JPMorgan also does not expect major cloud computing companies, or hyperscalers, to cut capital spending significantly.

Hyperscalers are large companies that provide cloud services and data centers on a very large scale. Capital expenditure is an expense for building or buying large assets, such as data centers, servers, and computing equipment.

The bank sees no fundamental indicators that point to a meaningful weakening in the next six to 12 months.

S&P Global said technology and defense spending are still supporting global economic growth.

The global purchasing managers' index for output of technology equipment rose in July at the fastest pace since May 2021. The purchasing managers' index or PMI is an indicator for reading business activity, including production and demand.

The broader technology sector also posted its strongest growth in 10 months.