Stock markets in the Asian region mostly suffered significant drops in Thursday's trading. Heavy pressure hit the technology sector following market players' concerns that the long rally in the artificial intelligence (AI) industry has now neared its saturation point. The Kospi index in Seoul was one of the worst affected by this mass sell-off.
On the South Korean stock exchange, the Kospi index plunged by more than seven percent. This slump was primarily driven by a drop in the share prices of memory chip giants SK Hynix and Samsung, which were slashed by about 10 percent each. Previously, positive AI sentiment had driven both issuers to record historic highs earlier this year.
Investors are now starting to doubt the sustainability of massive investments in the AI sector. They question whether the giant capital injections flowing over the past few years are proportional to the current valuations of tech company stock prices, which are deemed overpriced. This anxiety continues to shadow the market even though Dutch chip machine maker ASML recently reported a surge in second-quarter net profit and raised its annual sales projection.
Market sentiment was also influenced by market participants waiting for the latest financial report from Taiwan Semiconductor Manufacturing Company (TSMC). Although the long-term prospects of artificial intelligence technology are still considered promising, several analysts warn that stock market movements in this sector are already overbought and vulnerable to price corrections.
In addition to Seoul, the sell-off wave also swept through Tokyo and Taipei exchanges, which are home to many giant tech corporations. The index weakness also spread to Sydney, Shanghai, and Wellington. On the other hand, the Hong Kong exchange managed to record a gain of more than one percent, supported by the recovery of Chinese chip stocks that had been under pressure throughout this year.
