(June 24): Stocks in Asia were poised to extend Tuesday’s losses after a bruising Wall Street tech-led sell-off deepened concerns that the AI-driven equity rally has run too far.
Equity-index futures for Japan and South Korea all pointed lower, while Hong Kong contracts indicated modest gains. Contracts for US equities edged higher in early Wednesday trading after the tech-heavy Nasdaq 100 tumbled 3.3% and the S&P 500 fell 1.4% on Tuesday. A closely watched semiconductor gauge — which had more than doubled from its war-driven lows — slumped about 8%.
The risk-off mood drove investors into safer assets. Treasuries rallied, while haven currencies including the Japanese yen and Swiss franc outperformed. Oil declined on Tuesday as tanker traffic through the Strait of Hormuz became more visible following an interim peace agreement between the US and Iran.
The moves come as markets prepare to close out the first half of the year with some blockbuster gains that had been driven by easing geopolitical tensions, solid earnings and an AI trade revival. That advance has recently stumbled, however, with growing questions over whether the massive spending commitments by technology companies will generate sufficient returns.
“Whether or not we rally in the short-term, we continue to see medium-term downside risk for the tech/AI trade,” said Jonathan Krinsky, the chief market technician of BTIG LLC, adding he sees between 10% and 15% additional downside in the semiconductors group.
The US tech rout followed a sharp sell-off across Asia on Tuesday that sent South Korea’s Kospi Index down 10% and triggered a circuit breaker. AI-linked heavyweights SK Hynix Inc and Samsung Electronics Co each tumbled more than 10%.
See also: Korean stocks tumble 10% as extreme volatility rattles investors
Further volatility is expected in memory-chip stocks — an area that has accounted for the lion’s share of equity gains this year — as a local media report signalled SK Hynix is redirecting its efforts toward cheaper products.
“The risk-off trade reflects fear AI exuberance may be overdone,” said Chris Low at FHN Financial.
Attention will also shift to Micron Technology Inc’s results on Wednesday, which are expected to provide the clearest test yet of whether demand for AI infrastructure remains strong enough to sustain this year’s rally. Veteran strategist Louis Navellier said the report will be the grand finale to a “stunning” earnings season, noting that every dip should be viewed as a “buying opportunity”. The shares dropped 13% on Tuesday.
See also: Tech sell-off drags Asian stocks lower from record, oil down
Elsewhere in Asia, Indonesian assets will be in focus after MSCI Inc again delayed its review of the nation’s equities, saying it needs more time to assess whether recently announced transparency reforms are working.
In fixed income, Treasuries rallied as the equity sell-off and falling oil prices eased pressure on the Federal Reserve to raise interest rates to contain inflation. Swaps priced in slightly lower odds of more than one hike over the next year, leaving about 45 basis points of tightening implied by mid-2027.
Yields fell roughly one to three basis points, led by shorter maturities that are most sensitive to changes in Fed policy. The two-year yield declined around three basis points to 4.20%.
“The market is pretty well priced for a more hawkish Fed outlook at this point,” with inflation-adjusted two-year yields the highest since the Fed began cutting interest rates in September 2024, said Izaac Brook, an interest-rate strategist at RBC Capital Markets.
Uploaded by Isabelle Francis
