Asian markets tumbled Friday, with Tokyo's Nikkei 225 dropping 4% as a sell-off in artificial intelligence stocks spread across global markets. The rout extended a weeks-long retreat from AI names that had powered markets higher, forcing a reassessment of valuations and demand assumptions across the sector.
Shares in Taiwan fell 6.5% a day after TSMC, the world's largest contract chip manufacturer, announced plans to spend an additional $100 billion on U.S. fabrication plants. TSMC stock dropped 7.3% on Friday. South Korean markets were closed for a holiday.
In Japan, chip equipment maker Tokyo Electron sank 8.2%, while testing equipment maker Advantest fell 7.2%. SoftBank Group shed 9%. The Hang Seng in Hong Kong gave up 2%, and the Shanghai Composite lost 3.1%, dipping to its lowest level in nearly 11 months. Australia's S&P/ASX 200 declined 0.5%.
European markets opened lower, with Germany's DAX down 0.3% and France's CAC 40 off 0.4%. Britain's FTSE 100 bucked the trend, advancing 0.4%. Futures for the S&P 500 pointed to a 0.8% decline, while Dow futures were 0.5% lower.
AI stocks under sustained pressure
Stocks tied to artificial intelligence have been sliding for weeks as investors question whether prices climbed too far ahead of reality. The core worry: voracious spending on chips and memory may not be sustainable if AI fails to deliver the profit and productivity gains that justified the investment surge.
"Now investors are taking profits from the first-half winners and moving toward areas that were left behind," Stephen Innes of SPI Asset Management said.
On Thursday, the S&P 500 fell 0.5% even though nearly three out of every four stocks in the index rose. The Nasdaq composite lost 1.5%, dragged down by AI names. Nvidia fell 2.4%, making it the heaviest weight on the index. Micron Technology dropped 5.6%, trimming its year-to-date gain below 199%. SanDisk fell 12.6% but remains up 494% for the year, while Western Digital sank 9.2% but is still up 171%.
Oil surges on Iran strikes
Oil prices jumped to near one-month highs as the U.S. expanded its airstrike campaign against Iran, hitting bridges and collapsing a tower at a key Iranian port. The strikes are part of President Donald Trump's effort to pressure Tehran over its control of the Strait of Hormuz, a chokepoint for global crude shipments.
Brent crude, the international benchmark, rose 1.1% to $85.13 per barrel. U.S. benchmark crude was up 1.3% at $79.95 per barrel. The escalation raises the risk that tanker traffic through the Persian Gulf could be disrupted, threatening supply lines to customers worldwide.
Mixed signals from the U.S. economy
U.S. economic data released Thursday painted an uneven picture. Retail sales came in weaker than economists expected, suggesting consumers pulled back on spending. But fewer workers filed for unemployment benefits last week, signaling a solid job market, and a manufacturing survey for the mid-Atlantic region beat expectations.
In currency markets, the U.S. dollar was nearly unchanged at 162.38 Japanese yen. The euro edged down to $1.1440 from $1.1443.
Why this matters for finance professionals
The rotation out of AI stocks is reshaping portfolio math. With Nvidia, Micron, and other chip names giving back chunks of their gains, the question is whether this is a correction within a bull cycle or the start of a longer repricing. The simultaneous spike in oil prices adds a geopolitical variable that could pressure margins and consumer spending. For anyone managing cross-asset exposure, the combination of tech weakness and energy volatility demands a closer look at correlation assumptions that worked earlier in the year.
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