Asia report: KOSPI hits six-month low, Nikkei 225 tumbles on AI sell-off

(Sharecast News) - Stocks across Asia tumbled on Thursday, with the KOSPI falling to a six-month low, as fears of lofty valuations in the semiconductor, AI, and data centre sectors weighed heavily on tech-heavy indices in Tokyo and Seoul.

Chipmakers across the region were sold off sharply, including heavyweights TSMC, SK Hynix, Kioxia and Samsung Electronics, while investment giant SoftBank, which is heavily exposed to the AI sector, dropped over 9%.

Concerns over higher borrowing costs have raised questions about the sustainability of current AI investment levels, after data on Wednesday showed US inflation accelerated to 3.7% in September.

South Korea's KOSPI fell for the seventh straight session, falling 7.6% to settle at its lowest since mid-April. Meanwhile, Japan's Nikkei 225 dropped 4.9% to finish at its lowest level since 18 September. Taiwan's TAIEX also fell 3.4% to a four-week low.

"The fundamentals around memory still look solid, but the market knows this industry has always been cyclical, with periods of severe shortage eventually giving way to oversupply," said market commentator Stephen Innes in an email.

"That history matters whenever valuations get stretched, because a market can remain fundamentally healthy while investors simultaneously become less willing to pay yesterday's multiple for tomorrow's earnings."

Sentiment in the chip sector was hammered earlier in the week on reports that Chinese memory-chip group CXMT is making breakthroughs on a new cell architecture, in direct competition with Seoul-listed Samsung Electronics and SK Hynix. A company spokesperson reportedly said at an event in Shanghai that the new design to increase memory density will be available by year-end.

Losses were less severe - though still significant - elsewhere, with the Hang Seng down 1.1%, the Shanghai Composite down 1.6% and the Straits Times Index down 0.5%.

Over in Australia, however, the S&P/ASX 200 outperformed, finishing just 0.1% lower after poor labour-market data reinforced expectations that the Reserve Bank of Australia would be put off from raising rates again at its next meeting. Australian unemployment jumped to a five-year high of 4.7% in September, official data showed on Thursday.