Tech firms led heavy losses across Asian markets on Tuesday as investors brushed off a rebound on Wall Street amid growing fears about the AI investment boom ahead of crunch earnings releases.
In Tokyo, the Nikkei 225 closed down 1.3% to 64,075.52 points; Seoul - Kospi ended down 3.7% to 5,552.74 points and Hong Kong - Hang Seng Index closed down 1.3% to 23,867.74 points Tuesday.
Seoul and Tokyo again bore the brunt of the selling as chip giants SK hynix, Samsung and Kioxia took another beating owing to a sharp exit from a sector that saw blistering gains in the first half of the year.
Since June's record highs, traders have been questioning elevated valuations and when companies would see returns -- if any -- on the colossal sums they have spent to get ahead in the artificial intelligence race.
Unease over some firms' debt levels has also started to raise eyebrows as interest rates around the world rise, putting pressure on their finances.
Republic of Korea's Kospi sank more than three percent, with SK hynix off 4.2% and Samsung three percent down. Data-centre infrastructure firm Elice collapsed more than 30% on its trading debut as it was hammered by the AI fear.
The Nikkei 225 in Tokyo dropped more than one percent as Kioxia shed more than four percent and tech investor SoftBank plunged six percent.
Taiwan's TSMC was also in the red, though the country's Taiex inched slightly higher.
There were also losses in Hong Kong, Sydney, Singapore, Bangkok, Wellington and Manila.
Jakarta bounced more than four percent -- having plunged nearly 15% in the past two days -- on hopes for some moves by officials at Indonesia's stock exchange that would help it avoid being downgraded by index compiler MSCI. Shanghai and Manila also rose.
The selling came despite a positive day on Wall Street, where the Nasdaq was pushed solidly higher by gains in Amazon, Microsoft and Nvidia.
The closely watched Philadelphia Semiconductor Index climbed 1.6%, breaking eight days of losses, according to Bloomberg.
Focus is now on the release of earnings results, with Meta and Tesla due this week.
However, analysts pointed out that investors are expecting better and better reports to justify valuations.
"The market is no longer trading the headline numbers in isolation," said Stephen Innes at SPI Asset Management.
"It is trading the gap between what companies earn today and what they still have to spend to keep the AI machine humming tomorrow."
That, he said, "makes the post-earnings move increasingly an exercise in guidance and corporate-outlook gymnastics, where a perfectly respectable quarter can still get tossed overboard if the capex bill, margins or forward return profile fails to clear a bar that has been raised almost absurdly high."
Pepperstone's Chris Weston added: "The market doesn't need every AI infrastructure company to succeed.
"It does, however, need confidence that the enormous capital being deployed will generate returns above the cost of funding it. Without that confidence, rallies risk becoming opportunities to reduce exposure rather than rebuild it."
Oil prices climbed, with Brent hovering above $110 a barrel and West Texas Intermediate near $104, amid worries over Iranian attacks in the Strait of Hormuz.
