Asian stock rout deepens on AI worries ahead of tech earnings

Asian stocks slid on Wednesday, extending a brutal sell-off as anxiety about artificial intelligence valuations, rising competition, and spending rocked markets ahead of crucial earnings from big tech firms and a US Federal Reserve policy decision. South Korea's Kospi fell 5%, and SK Hynix shares dropped 9% despite earnings showing operating profit more than six times higher, as lofty expectations were missed. Oil prices jumped 3% after fresh attacks in the Middle East shattered the relative calm of recent days in the US-Iran war.

Asian stock rout deepens on AI worries ahead of tech earnings Asian chipmakers are central to 2026’s AI-driven rally and more recent concerns about its staying power SINGAPORE Asian stocks slid on Wednesday Jul 29 extending a brutal sell-off as anxiety about artificial intelligence valuations, rising competition and spending rocked markets ahead of crucial earnings from big tech firms and a US Federal Reserve policy decision https://www.businesstimes.com.sg/international/global/will-he-or-wont-he-fed-chief-warsh-could-spring-big-surprise-raising-rates-week . Oil prices jumped https://www.businesstimes.com.sg/companies-markets/energy-commodities/oil-prices-rebound-more-us2-barrel-prospect-tightening-us-crude-supplies after fresh attacks in the Middle East shattered the relative calm of recent days in the US-Iran war as investors fret about the impact of depleting supplies on prices and global rates. Asian chipmakers have been at the epicentre of this year’s AI-driven rally and, more recently, investor concerns about its staying power, sparking sharp market swings. South Korea’s Kospi fell 5 per cent, reversing earlier gains after sinking more than 10 per cent to a three-month low on Tuesday, despite strong earnings from SK Hynix. Shares of SK Hynix fell 9 per cent as investors digested earnings that showed the chipmaker increased quarterly operating profit more than six times but missed lofty expectations https://www.businesstimes.com.sg/companies-markets/sk-hynixs-q2-profit-rises-sixfold-record-high-ai-chip-demand-misses-forecasts . “With the FOMC meeting sandwiched between major US tech earnings this week, and expectations for AI capex already elevated, investors appear to be taking some risk off the table ahead of a critical test for both AI spending expectations and market liquidity,” said Gary Tan, portfolio manager at Allspring Global Investments. MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 1 per cent after shedding 3.6 per cent on Tuesday and was set for a monthly drop of 8 per cent. Japan’s Nikkei fell 1 per cent and is bracing for a more than 10 per cent drop in July. Earnings from the “Magnificent Seven” members Microsoft and Meta later in the day will be a key test of the AI trade, particularly after Alphabet and Tesla spooked investors https://www.businesstimes.com.sg/companies-markets/magnificent-7-lose-us797-billion-ai-sceptics-dump-tech-stocks last week with negative cash flow reports. Nick Twidale, chief market strategist at ATFX Global in Sydney, expects another tough day for Asian equities, while the news from the Middle East is also expected to weigh. “I think the risk of a Fed hike will also concern investors, so rather than a more usual pre-Fed quieter market, I’ve got a feeling it could be a volatile day ahead,” he said. Nasdaq futures were choppy in Asian hours and were last up 0.5 per cent while European futures pointed to a higher open. Hong Kong’s Hang Seng index rose 1.5 per cent while China’s blue-chip index was flat. Oil jumps ahead of Fed meeting Brent futures jumped 3 per cent to US$86.80 per barrel while US West Texas Intermediate WTI crude rose more than 3 per cent to US$81.95 after US Central Command said Iran had launched multiple ballistic missiles that were successfully intercepted. “The latest attack highlights that the two sides remain a long way from resolving the core dispute of passage through the Strait of Hormuz that caused the earlier memorandum of understanding to collapse,” said Tony Sycamore, market analyst at IG. Iran effectively shut the key waterway to ships other than its own after the US and Israel launched strikes on Feb 28. A deal in June between Washington and Teheran https://www.businesstimes.com.sg/international/focus-turns-strait-hormuz-after-us-and-iran-presidents-sign-ceasefire-agreement partially reopened it, but the agreement collapsed in early July after Iran fired on ships using a channel it had not approved. That has again put inflation pressures in the spotlight ahead of the US Federal Reserve’s policy decision due later on Wednesday. The US central bank is seen as more likely to leave interest rates steady even as a growing number of its policymakers fret openly about inflation. The decision remains unusually hard to call under the no-guidance regime adopted by the new Fed chair Kevin Warsh, with traders pricing in a 33 per cent chance of a hike. The US dollar was perched near a one-month high ahead of the decision. “We think the market may once again be underestimating the extent of the hawkish shift at the Fed, and that the for now moderate increase in energy prices may tip an already finely balanced meeting in favour of a hike this week,” said Frank Flight, head of macro strategy at Citadel Securities. “We acknowledge that it is a close call, but we now see a rate hike at the July meeting,” Flight said. REUTERS Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free. Share with us your feedback on BT's products and services