Asia-Pacific markets fall on tech sell-off and fears of AI bubble
Asian stock markets declined sharply amid growing investor concerns over inflated valuations in the technology sector, particularly related to artificial intelligence (AI). Japan's Nikkei 225 dropped nearly 1.8%, closing just below 49,500, experiencing one of its steepest single-day declines this year. Major tech firms like Tokyo Electron and Advantest saw significant losses as traders prepared for Nvidia's upcoming earnings report with apprehension about potential overvaluation in AI-related stocks.
The tech sell-off extended across the region with South Korea's Kospi falling nearly 2%, led by declines in Samsung Electronics and SK Hynix. Hong Kong's Hang Seng shed 0.85%, while Australia's S&P/ASX 200 decreased by 1.62%, reflecting a widespread retreat from high-flying tech names.
Japan faced additional pressures from rising government bond yields as investors grew uneasy about Prime Minister Sanae Takaichi's expansive fiscal policies. The yield on 30-year Japanese government bonds surged to 3.31%, signaling market fears regarding Japan’s ballooning public debt, which exceeds 200% of its GDP. The yen weakened past 155 against the US dollar, amplifying concerns about fiscal sustainability.
This regional downturn followed Wall Street’s negative session, where the S&P 500 fell nearly 1%, breaking below its 50-day moving average alongside the Nasdaq Composite. Nvidia shares declined ahead of its earnings report, heightening anxieties about the sustainability of the AI stock rally. Despite this, Alphabet's shares rose after Berkshire Hathaway disclosed a substantial stake, signaling some continued confidence among certain investors.
Overall, the Asia-Pacific markets are navigating a delicate phase marked by reassessment of AI valuations, fiscal uncertainties in Japan, and cautious investor sentiment following Wall Street's tech-driven pullback.
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