(Sharecast News) - Asia-Pacific markets closed mixed but mostly lower on Tuesday as semiconductor stocks came under renewed pressure ahead of a packed week of megacap earnings and the Federal Reserve's latest rate decision.
Amazon, Meta Platforms, Microsoft and Apple are all due to report, with investors watching closely for signs that heavy artificial intelligence spending by hyperscalers will continue to support chip demand.
The Fed is expected to leave rates unchanged on Wednesday, while futures markets continue to price in a quarter-point increase in September.
"Markets are getting relief from oil, but not from AI. Brent's retreat toward $88 per barrel has eased some inflation anxiety ahead of the Fed, yet the bigger overnight story is a renewed semiconductor selloff as investors question the circularity, financing burden and competitive assumptions behind the AI capex boom," said Patrick Munnelly, market strategy partner at TickMill.
"The result is an unusual tape: lower oil should be risk-positive, but chips are heavy enough to keep index sentiment fragile."
Most markets close lower
Japan's Nikkei 225 tumbled 3.95% to 62,364.92 and the Topix fell 2.52% to 3,963.59.
Kioxia Holdings plunged 18.33%, Sumco Corporation dropped 16.53% and Lasertec lost 14.05%.
China's Shanghai Composite declined 1.16% to 3,813.31, while the Shenzhen Component sank 4.52% to 13,509.68.
Guangzhou Fangbang Electronics fell 10.79%, Sichuan Em Technology lost 10.11% and HeBei Jinniu Chemical Industry dropped 10.01%.
Hong Kong bucked the regional trend, with the Hang Seng Index rising 0.41% to 25,310.85 as NetEase gained 4.5%, JD.com rose 4.11% and Nongfu Spring advanced 3.77%.
"That has two implications. First, Western incumbents may face a longer-term margin and market-share challenge," Munnelly added.
"Second, the profits from AI infrastructure may need to be distributed more broadly across a geopolitically fragmented ecosystem.
"The AI pie may still be huge, but markets are questioning whether the current leaders keep quite as much of it as valuations imply."
South Korea suffered the steepest losses, with the Kospi 100 plunging 11.63% to 7,389.89.
LG Innotek fell 16.29%, Hybe Corporation lost 16.09% and SK Telecom dropped 16.04%.
The Korea Exchange halted Kospi trading for 20 minutes after the broader index fell 8%, following an earlier five-minute suspension of programme trading under its sell-side sidecar mechanism.
"Asia bore the brunt of that worry. South Korea's Kospi plunged nearly 11%, triggering a circuit breaker, while Japan's Nikkei fell 4.4%," Munnelly said.
"Both markets have been among this year's strongest performers, precisely because of their leverage to semiconductors, AI infrastructure and global risk appetite.
"That leadership has now become a vulnerability.
"High-beta winners are being forced to reprice as investors move from 'AI spending is good' to 'AI spending needs to earn its cost of capital.'"
South Korea's consumer sentiment index edged up to 106.8 in July from 106.6 in June.
Expectations for future income improved to 101 from 100 and future living conditions rose to 98 from 97, while views on current economic conditions weakened to 84 from 86.
One-year inflation expectations remained at 2.7%, with three- and five-year expectations both at 2.6%.
Australia's S&P/ASX 200 gained 0.6% to 8,947.80, with Viva Energy up 8.61%, Wisetech Global rising 8.06% and Guzman Y Gomez gaining 7.88%.
Across the Tasman Sea, New Zealand's S&P/NZX 50 edged up 0.08% to 13,861.93, as Fisher & Paykel Healthcare rose 2.18%, Spark New Zealand gained 2.06% and Skellerup Holdings added 1.19%.
On the upcoming megacap results, Munnelly added that the timing was "awkward because hyperscaler earnings are imminent".
"Apple, Meta, Microsoft and Amazon report later this week, and investors will focus less on headline revenue beats and more on AI capex discipline.
"The key questions are simple: are cloud and AI workloads monetising fast enough, are margins protected, and are capex plans being funded from operating cash flow rather than financial engineering?
"The market has become much less forgiving of 'trust us, the returns will come.'"
Dollar stronger on regional peers
In currency markets, the dollar rose 0.1% against the yen to JPY 163.92, gained 0.38% against the Australian dollar to AUD 1.4356 and advanced 0.09% against the New Zealand dollar to NZD 1.7335.
Brent crude fell 1.98% to $86.61 a barrel and West Texas Intermediate declined 1.89% to $81.05 as traders monitored talks between Iran, Saudi Arabia and Oman over reopening shipping through the Strait of Hormuz.
Reporting by Josh White for Sharecast.com.
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