AI Stock Sell-off Triggers Sharp Decline Across Asian Markets

Global equity markets witnessed a sharp bout of volatility on Friday as investors booked profits in high-flying artificial intelligence (AI) stocks, triggering a broad sell-off across Asia and weighing on US futures. The correction came after weeks of record-setting gains in AI-driven markets, reflecting growing concerns that soaring valuations may be outpacing corporate earnings despite continued optimism over long-term investments in AI infrastructure.

Asian markets led the decline, with Japan's Nikkei 225 tumbling 5 per cent to 68,783.50 and South Korea's Kospi plunging 8.4 per cent to 8,182.54 , marking the steepest fall in the region. Taiwan's Taiex dropped 3.3 per cent , Hong Kong's Hang Seng lost 1.9 per cent , while China's Shanghai Composite slipped 2.1 per cent . Australia's S&P/ASX 200 ended nearly unchanged as gains in banking and mining stocks offset weakness in technology shares.

The correction followed record highs in the Nikkei and Kospi earlier this week and was driven largely by profit booking in AI-linked semiconductor companies. Markets in Japan, South Korea and Taiwan remain particularly sensitive to swings in AI sentiment because of their heavy exposure to chipmakers such as Samsung Electronics , SK Hynix and TSMC .

The weakness extended to global markets, with US futures and European equities trading lower after Wall Street ended mixed overnight. The S&P 500 closed nearly flat, the Dow Jones edged up 0.1 per cent, while the Nasdaq Composite fell 0.5 per cent. Apple dropped 6.1 per cent after raising prices on several products, whereas Micron Technology surged 15.7 per cent on stronger-than-expected earnings and an upbeat forecast. Qualcomm also lifted its long-term growth outlook, citing rising AI demand.

Despite the market correction, analysts believe the global AI investment cycle remains robust. Technology giants including Microsoft, Amazon, Alphabet, Meta and Oracle continue investing hundreds of billions of dollars in AI data centres, cloud infrastructure and advanced semiconductor technologies.

Indian equities have so far remained relatively resilient as benchmark indices are driven more by financials and consumer stocks than semiconductor companies. However, GIFT Nifty indicated a weak opening after falling more than 150 points , suggesting domestic markets could mirror the global risk-off sentiment.

Meanwhile, US inflation rose to 4.1 per cent from 3.8 per cent , reinforcing expectations that the Federal Reserve may remain cautious on interest-rate cuts. At the same time, falling energy prices offered some relief, with Brent crude declining 1.8 per cent to USD 74.13 a barrel and WTI crude falling 2 per cent to USD 70.46 , after easing geopolitical tensions restored oil flows through the Strait of Hormuz .

India continues to strengthen its role in the AI ecosystem through the IndiaAI Mission , expansion of hyperscale data centres and rising investments by domestic and global technology firms. While Friday's sell-off underscores concerns over stretched valuations, market experts view it as a healthy correction rather than a reversal of the AI-led investment boom.