Tech Stock Selloff Worsens in Asia, Silver Plunges: Markets Wrap
(Bloomberg) — A global tech rout snowballed into Asia as mounting anxiety over frothy valuations and massive artificial intelligence spending drove investors to trim exposure.
MSCI’s gauge of Asian technology shares fell on Thursday for a fifth time in six sessions 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 2.8%. Consumer and health-care stocks advanced. MSCI’s gauge of broader Asian stocks dropped 1.4%.
After the tech-heavy Nasdaq slumped during the US session, sentiment was further hit as Alphabet Inc., Qualcomm Inc. and Arm Holdings Plc all fell in extended trading following tepid earnings. Futures contracts for the US gauges gave up initial gains to trade flat.
Outside of tech, attention was squarely on precious metals. Silver plummeted as much as 15% and gold dropped as much as 3.5%, a sharp change in course after two days of recovery from a historic market rout that started on Friday.
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.
“Asian markets are getting a hit from the overnight selloff on Wall Street,” said Nick Twidale, chief market analyst at AT Global Markets. “I don’t know whether we can call it the tech peak has reached, but I do think there is room in the market for more correction. It’s the traditional sell tech and move back into more defensive sectors.”
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%.
The Asian moves 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.
Down about 20% from an Oct. 2 high, the Hang Seng Tech Index is poised to close in a bear market. The gauge has fallen for six straight sessions, as concerns over Chinese tax and earnings weigh on sentiment already shaken by a global AI selloff.
“As crowded momentum trades unwind, we’re seeing pressure in software, semis and parts of the AI ecosystem, while leadership rotates elsewhere,” said Billy Leung, an investment strategist at Global X Management.
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…
“Traders will be watching for this week’s silver-price nadir just above $71, but arguably more significant is the $70 mark. The precious metal hasn’t been in the $60s range since December and a return to that range will deepen the risk aversion mood across assets.”
— Mark Cranfield, MLIV. For full analysis, click here.
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, Bitcoin extended its losses to trade below $72,000, while the yen fluctuated ahead of the elections in Japan set for the weekend. The Bloomberg Dollar Spot Index held its gains from the prior session.
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 were little changed as of 12:18 p.m. Tokyo time Japan’s Topix fell 0.1% Australia’s S&P/ASX 200 fell 0.5% Hong Kong’s Hang Seng fell 1.2% The Shanghai Composite fell 1.1% Euro Stoxx 50 futures fell 0.3% Currencies
The Bloomberg Dollar Spot Index rose 0.1% The euro fell 0.2% to $1.1788 The Japanese yen was little changed at 156.82 per dollar The offshore yuan was little changed at 6.9445 per dollar Cryptocurrencies
Bitcoin fell 1.8% to $71,337.18 Ether fell 0.9% to $2,105.53 Bonds
The yield on 10-year Treasuries declined one basis point to 4.26% Japan’s 10-year yield was little changed at 2.245% Australia’s 10-year yield declined one basis point to 4.85% Commodities
West Texas Intermediate crude fell 2% to $63.81 a barrel Spot gold fell 2.3% to $4,850.30 an ounce This story was produced with the assistance of Bloomberg Automation.
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