(Sharecast News) - Asia-Pacific equity markets mostly weakened on Friday, tracking a technology-led sell-off on Wall Street after fresh concerns over artificial-intelligence spending and chip-sector outlooks rattled investor confidence.
South Korea led regional losses for a second session, while Japanese equities reversed early declines, with the broader Topix hitting a fresh record despite soft domestic economic data.
The cautious tone followed a sharp global pullback in technology assets.
"A sharp sell-off has shaken the tech sector, hitting software stocks and cryptocurrencies amid weak labour market data and doubts about AI-driven valuations," said Patrick Munnelly, market strategy partner at TickMill.
He added that "economic uncertainty and scepticism over AI's returns are driving market volatility and forcing investors to reassess their strategies."
Overnight in the United States, technology stocks sold off sharply.
The Dow Jones Industrial Average fell 1.20%, the S&P 500 dropped 1.23% - pushing it into negative territory for the year - and the Nasdaq Composite slid 1.59%.
Sentiment was hit after Alphabet flagged a sharp increase in artificial-intelligence investment, with capital expenditure set to reach $185bn in 2026, sending its shares down 0.5%.
Qualcomm tumbled more than 8% after issuing a weaker-than-expected forecast, citing a global memory shortage.
Munnelly noted that "Alphabet's stock also slid despite exceeding revenue expectations, as aggressive AI spending plans raised profitability concerns," adding that the broader sell-off left "nine of 11 S&P 500 sectors declining and the equal-weighted index retreating from record highs."
He also pointed to signs of strain in the US economy, saying "weak labour data adds to market worries, with job openings hitting a three-year low, layoffs rising, and jobless claims exceeding forecasts."
Tokyo market the lone riser ahead of Sunday's election
Japanese equities finished higher, recovering from early losses.
The Nikkei 225 rose 0.81% to 54,253.68, led by gains in Ajinomoto Co, up 13.39%, Mitsubishi Motors, up 9.97%, and Omron, up 7.93%.
The broader Topix climbed 1.28% to 3,699.00, marking a fresh record high.
The advance came despite data showing household spending fell sharply in December, underscoring pressure on consumers from rising prices.
Spending dropped 2.9% month-on-month, far worse than the 1.3% decline expected, and reversed November's 6.2% rise.
On a year-on-year basis, spending fell 2.6%, versus expectations for flat growth and following a 2.9% increase previously.
While the figures pointed to weakening consumption momentum at the end of 2025, analysts saw little impact on the Bank of Japan's policy outlook, with inflation still the dominant driver and markets continuing to price a possible rate hike as early as April.
Munnelly said that "investors are betting on a win for Japanese prime minister Takaichi's ruling LDP party in the upcoming election," adding that "this optimism has driven a surge in Japanese stocks while pressuring the yen and government bonds."
Separately, Japan's foreign exchange reserves rose to $1.395trn, highlighting ample capacity to support the yen if needed, while attention also turned to the lower-house election on Sunday, with ruling parties expected to secure more than 300 of the 465 seats.
Greater China markets edge lower
Chinese equities edged lower - the Shanghai Composite slipped 0.25% to 4,065.58, weighed down by sharp falls in Guangdong Hotata Technology Group, down 10.02%, Baida Group, down 9.94%, and Zhewen Interactive Group, down 9.79%.
The Shenzhen Component declined 0.33% to 13,906.73.
Hong Kong stocks also retreated, with the Hang Seng Index falling 1.21% to 26,559.95.
Losses were led by AIA Group, which dropped 5.54%, Alibaba Group, down 2.88%, and HSBC Holdings, down 2.67%.
South Korean markets underperformed again, reflecting their heavy exposure to technology and automotive stocks amid volatile sentiment toward the sector.
The Kospi 100 fell 1.11% to 5,732.09, with SK Telecom plunging 10.71%, Hanwha Systems down 7.46%, and Coway lower by 6.57%.
Munnelly said "market volatility was on full display; Korean stocks took centre stage as the Kospi experienced a dramatic 5% plunge early on, prompting a temporary trading suspension," highlighting the sensitivity of the market to global technology moves.
Sydney sees region's steepest declines
Australian equities saw the steepest declines in the region.
The S&P/ASX 200 dropped 2.03% to 8,708.80, dragged down by heavy selling in Paladin Energy, which fell 10.92%, Flight Centre, down 10.27%, and IperionX, down 9.26%.
New Zealand markets were closed for the Waitangi Day public holiday.
In broader markets, Munnelly said that "Asian markets found some footing after early losses on Friday, but caution lingered among investors, particularly in the tech sector," as global volatility spilled across asset classes.
He noted that "Bitcoin plunged nearly 50% from its October peak to $63,500," before later rebounding, while precious metals also swung sharply, with "silver plummeting 16%" before "rebounding 4.1% after suffering a steep 20% decline on Thursday."
Dollar weaker as oil prices rise
In currency markets, the dollar was little changed against the yen, last trading down 0.06% at JPY 156.94.
The greenback also weakened against the Australian and New Zealand dollars, down 0.68% on the former at AUD 1.4338 and lower by 0.6% against the latter to change hands at NZD 1.6706.
Oil prices edged higher, with Brent crude futures last up 0.61% on ICE at $67.96 per barrel, and the NYMEX quote for West Texas Intermediate rising 0.62% to $63.68.
Reporting by Josh White for Sharecast.com.
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