The shockwaves from the US tech sector are being felt most acutely in Asia, where major indices have suffered steep declines. Japan’s Nikkei 225 shed 3.2% in a single session, leading a regional rout that saw Hong Kong’s Hang Seng index fall 1.7%. The sell-off is being driven by a global retreat from risk assets, sparked by fears that the Artificial Intelligence boom is turning into a bust.
Asian markets are particularly sensitive to the tech cycle due to the region’s dominance in semiconductor manufacturing and electronics supply chains. When US executives from Google and Klarna warn of “irrationality” and “nervousness” regarding AI infrastructure spending, Asian suppliers are the first to feel the chill. If demand for data centers and chips slows, the earnings of major Asian tech firms could evaporate.
This anxiety is mirrored in the digital asset markets, which are popular among Asian retail investors. The global crypto market has lost over $1 trillion, with Bitcoin crashing to $91,212. The drop in crypto wealth further dampens consumer sentiment in the region, adding another headwind to economies that are already struggling with slower growth.
The currency aspect is also playing a role. As expectations for a US Fed rate cut fade, the US dollar remains strong against Asian currencies. While this usually helps exporters, the current environment of risk aversion means that capital is flowing out of emerging markets back to the safety of the US dollar, exacerbating the stock market declines.
With the “AI Bubble” now cited as the top tail risk by global fund managers, Asian investors are bracing for further turbulence. The synchronized drop in Tokyo, Hong Kong, and later London and New York, suggests that the market is undergoing a fundamental repricing. Until the dust settles on the AI valuations, the region’s markets remain highly vulnerable.