Global equity markets recently experienced sharp declines, led by losses in technology shares as investors shifted away from the booming tech sector. The move reflects growing doubts about artificial intelligence profitability and follows a period of sharp price gains in tech-related companies.
U.S. stock indices posted losses during Tuesday’s session as investors moved out of AI-linked shares. The Dow Jones Industrial Average gave up 0.25% after reaching a new intraday high. The S&P 500 dropped 0.45%, and the Nasdaq Composite fell 1.16%, with chipmakers at the forefront of the retreat.
Sharp declines persisted in Asian markets, particularly in South Korea, where the Kospi index fell into bear market territory on Wednesday after sliding over 6% to its session low of 7,186. The index marked its third consecutive day of declines. Key technology companies were among the biggest losers: Samsung Electronics shares fell 7%, SK Hynix dropped 4%, and LG Energy Solution decreased by 5%.
The downturn accelerated after Samsung’s stock sank by nearly 10% on Tuesday. This drop came despite the company projecting a substantial 19-fold increase in second-quarter operating profit, as investors questioned the sustainability of increased demand for AI-related chips. Confidence was further tempered by concerns that lofty memory chip prices and strong pre-earnings rallies had set high expectations, leaving limited room for further gains following the company’s results.
According to Chaiyot Jiwangkul, Assistant Director for Securities Analysis at Krungsri Securities, recent declines in tech and electronics sectors are not viewed as reflective of a speculative bubble, citing continued real demand for data center components. Nonetheless, sustainability of current demand levels remains in question, particularly amid the broader tech sell-off. While some firms reported robust earnings, these often failed to meet heightened market expectations.
Krungsri characterized the recent shift as a reallocation of investment away from rapidly rising chip and technology stocks, rather than a sign of sector overheating. Funds are reportedly moving toward sectors with more compelling valuations, including value-themed equities and stocks in regional ASEAN markets including Thailand.
