Asian Stocks Fall as Tech Selloff Gains Momentum: Markets Wrap

(Bloomberg) — Asian stocks extended their slide into a second day as a retreat from tech deepened, fueled by investor anxiety over frothy valuations and the massive scale of artificial intelligence spending.

The MSCI Asia Pacific Index dropped 0.7%, with Samsung Electronics Co. and SoftBank Group Corp. among the losers. South Korea’s Kospi Index — a poster child for AI investments — led the losses, dropping 2%.

That came after the Nasdaq 100 had its worst two-day rout since October, breaching its 100-day moving average, a level seen by some analysts as a harbinger for more losses. Sentiment was further hit as Alphabet Inc., Qualcomm Inc. and Arm Holdings Plc all fell in extended trading following tepid earnings. Still, futures contracts for the US gauges rose 0.3% in a sign the selling pressure may be easing.

Elsewhere, gold and silver were mixed in volatile trading, while Bitcoin traded below $73,000. The yen was a touch weaker at 156.91 to a dollar, extending its losses with elections in Japan set for the weekend. The Bloomberg Dollar Spot Index held its gains from the prior session.

While AI-driven selloffs have surfaced in the past, nothing rivals the rout rippling through stock and credit markets this week. With the US economy proving resilient, investors are rotating into other sectors as anxiety mounts over tech valuations, soaring capital expenditures, and the risk that AI will cannibalize established software business models.

“There might be a glass-half-full and a glass-half-empty perspective on the moves here,” said Kyle Rodda at Capital.com. “On the one hand, tech stocks are potentially too richly valued. On the other hand, the strength in the market is broadening out in a sign of improving economic fundamentals.”

Rotation out of tech was the main theme during the US session and software firms saw another wave of selling, but moves were bigger in chipmakers. A Bloomberg gauge of the so-called Magnificent Seven companies fell 1.8%.

In the span of two days, hundreds of billions of dollars were wiped off the value of stocks, bonds and loans of companies across Silicon Valley. Software stocks were at the epicenter, plunging so much that the value of those tracked in an iShares ETF has now dropped almost $1 trillion over the past seven days.

What Bloomberg strategists say…

What looks like a brutal equity rotation away from concentration is actually proving to be a bright spot for the broader market. US equities are experiencing a rotation that in the moment seems painful, but was ultimately inevitable.

— Brendan Fagan, Macro Strategist. For full analysis, click here.

Traders are also paying attention to the moves in the precious metals. Gold and silver fluctuated, largely holding onto two days of gains after retreating from a record on Friday.

Precious metals soared last month in a rally underpinned by speculative momentum, geopolitical upheaval and concerns about the Federal Reserve’s independence. The surge came to a sudden halt at the end of last week, with silver seeing its biggest ever daily drop on Friday and gold plunging the most since 2013.

In other corners of the market, the pound and euro were steady ahead of interest rate decisions due later Thursday. The European Central Bank and Bank of England are expected to leave rates unchanged.

Elsewhere, US President Donald Trump and President Xi Jinping of China discussed trade and geopolitical flashpoints, including Taiwan, during a Wednesday call ahead of a planned face-to-face meeting later this year.

In commodities, oil fell for the first time in three days after Iran confirmed it would hold negotiations with the US, easing the immediate risk of military strikes against the OPEC producer.

Corporate Highlights:

Nvidia Corp. is nearing a deal to invest $20 billion in OpenAI as part of its latest funding round, according to people familiar with the matter, marking the chipmaker’s single biggest investment in the ChatGPT developer. SpaceX held meetings with banks from outside the US for its IPO, according to people familiar with the matter, as Elon Musk’s rocket and satellite maker targets a listing this year on an ambitious timeline. Amazon.com Inc. is taking the wrapper off its upgraded Alexa in the US, offering the AI-enhanced digital assistant to paying Prime customers and introducing a free version for everyone else. Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.3% as of 10:22 a.m. Tokyo time Japan’s Topix rose 0.5% Australia’s S&P/ASX 200 fell 0.2% Hong Kong’s Hang Seng fell 0.8% The Shanghai Composite rose 0.8% Euro Stoxx 50 futures were little changed Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1803 The Japanese yen was little changed at 156.87 per dollar The offshore yuan was little changed at 6.9426 per dollar Cryptocurrencies

Bitcoin fell 1% to $71,905.01 Ether fell 0.2% to $2,121.76 Bonds

The yield on 10-year Treasuries was little changed at 4.27% Japan’s 10-year yield was unchanged at 2.250% Australia’s 10-year yield was little changed at 4.86% Commodities

West Texas Intermediate crude fell 1.4% to $64.22 a barrel Spot gold fell 0.3% to $4,949.05 an ounce This story was produced with the assistance of Bloomberg Automation.

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