Technology stocks suffer a severe blow.
Global AI bubble fears intensify, sentiment in the Asia-Pacific market shifts abruptly.
On Wednesday, the previously surging stock markets in Japan and South Korea suddenly collapsed, Taiwan's stock market plummeted, and both Hong Kong and mainland China stocks opened lower across the board.
Among them, South Korea’s KOSPI index plunged more than 5% at one point, the Nikkei 225 index dropped over 4%, the Hang Seng Tech Index and Taiwan Weighted Index fell more than 2%, while the Hang Seng Index and Shanghai Composite Index declined by 1%.
The technology sector, centered on semiconductors and AI chips, became the 'epicenter,' with major Asia-Pacific tech giants suffering significant losses.
Flash crash, circuit breaker!
As the Asia-Pacific market experienced a massive sell-off, Japan and South Korea led the downturn.
As of this writing, the Nikkei 225 index plummeted nearly 2,400 points, dropping over 4% below the 50,000 mark to currently stand at 49,104.05 points.
Among the declines, SoftBank Group’s stock price plunged more than 14% during trading, marking its largest drop since late October.
The South Korean KOSPI index once plummeted by more than 5%, consecutively breaking through the 4100, 4000, and 3900-point thresholds. However, the decline subsequently narrowed, currently standing at 3973.17 points.
Shares of tech giant SK Hynix fell by as much as 6%, while Samsung Electronics dropped nearly 5%.
During trading, after the Kospi 200 index futures fell more than 5%, a circuit breaker mechanism was triggered for the KOSPI index, halting programmatic trading for five minutes.
The last time South Korea suspended programmatic sell orders was in April 2025.
It is worth noting that before this, the stock markets in Japan and South Korea had been on a remarkable upward trajectory, leading other major economy indices in the Asia-Pacific region.
In the just-concluded October, the benchmark KOSPI index of South Korea set intraday record highs 16 times and broke through the 4000-point barrier.
From October to date, the benchmark KOSPI index has surged by 16%, with a cumulative increase of nearly 70% year-to-date.
The Japanese stock market also surpassed the 50,000-point mark for the first time in October.
Prior to this sharp decline (as of November 4), the Nikkei 225 Index had remained above the 50,000-point mark for six consecutive trading days.
From October to date, the index has surged nearly 10%, with a year-to-date increase of approximately 23%.
However, sentiment in the Japanese and Korean stock markets has begun to reverse over the past two days. Market analysts attribute this to several factors impacting the Asia-Pacific equity markets:
Firstly, the sustained strength of the US dollar has put pressure on highly valued technology stocks; secondly, recent declines in previously high-flying assets have weakened the AI investment narrative; thirdly, divergent signals from Federal Reserve officials regarding the prospect of interest rate cuts have dampened market sentiment; and fourthly, while there are positive signs in trade disputes, uncertainties persist.
Panic over an AI bubble spreads
Global markets appear to be on the verge of significant turbulence.
Amid fears of an AI bubble burst, the US stock market has already taken the lead in cooling down overnight.
Among the 'Magnificent Seven' of US stocks, all except Apple, which edged slightly higher, suffered losses. Tesla plummeted over 5%, NVIDIA fell more than 3%, and Google dropped over 2%.
Panic sentiment on Wall Street continues to spread.
Previously, Michael Burry, known for his 'Big Short,' disclosed that 80% of his portfolio at the end of Q3 was allocated to betting on put options for Palantir and NVIDIA, raising market concerns about the sustainability of AI sector valuations.
On Tuesday, despite Palantir's earnings surpassing Wall Street expectations, its stock price plummeted by 8%, while NVIDIA, which has yet to release its results, fell nearly 4%.
In response, Palantir’s CEO fired back, stating that Burry's short-selling of Palantir and NVIDIA was 'simply insane'!
“He is essentially shorting AI… and the targets he chose are us and NVIDIA. I do find this behavior shocking, and if it turns out to be wrong, I will definitely celebrate.”
Due to concerns over a potential AI bubble burst, major banks such as Goldman Sachs and Morgan Stanley have also issued warnings: global equity markets may face a correction.
The CEO of Morgan Stanley noted that investors should be mentally prepared for a possible decline of 10% to 15%, not triggered by any macro cliff effect,but rather caused by other factors.
Goldman Sachs Chairman and CEO David Solomon stated,The stock market is likely to experience a pullback of 10% to 20% within the next 12 to 24 months.
Chris Weston, Head of Research at Pepperstone Group, stated:
"The entire market is an ocean of red (declines). There are few reasons to buy now, and the market lacks short-term catalysts as we approach NVIDIA's earnings report on November 19."
