Asian chip stocks tumble as Nasdaq rout spreads; Nikkei 225 down 6.3%

Asian chip stocks fell steeply on Friday, carrying a selloff in US artificial intelligence shares into the region’s biggest semiconductor names. Japan’s Nikkei 225 was down 6.3 percent at 57,209.42 as of 05:23 GMT, and SK Hynix, Samsung Electronics, TSMC and SoftBank Group all posted heavy losses.

The moves followed Thursday’s slide on Wall Street, where the Nasdaq Composite closed down 5.5 percent at 24,315.00. The S&P 500 fell 4.4 percent to 7,353.73, the Dow Jones Industrial Average lost 3.4 percent and the Russell 2000 dropped 4.4 percent. The Cboe Volatility Index rose to 28.18 from 16.61. On closing levels, the Nasdaq ended about 12 percent below where it stood on Oct. 6, putting it in correction territory, usually defined as a fall of 10 percent or more from a recent high.

Losses across Korea, Japan and Taiwan

According to CNBC, SK Hynix fell more than 8 percent in Seoul and Samsung Electronics lost 7 percent. LG Innotek dropped 10 percent and LG Display 7.7 percent. Investing.com reported that trading in South Korea was halted after the Kospi fell 8 percent, and the Financial Times reported that the index had dropped below 5,000 points.

In Tokyo, CNBC reported that SoftBank Group fell 11.6 percent and chip-testing equipment maker Advantest dropped 12.2 percent. Tokyo Electron fell 7.3 percent, Kioxia Holdings nearly 10 percent and Renesas Electronics 7.5 percent. The Financial Times reported that the Nikkei had fallen below 60,000 for the first time since May. The index’s Friday low was 56,745.81, and as of 05:23 GMT it was down about 19 percent from its Oct. 6 close of 70,683.98, close to the 20 percent decline commonly used to define a bear market.

In Taiwan, CNBC reported that TSMC fell 9.6 percent. Hon Hai Precision Industry, also known as Foxconn, lost 9.4 percent and Foxconn Technology 9.1 percent. In mainland China, the STAR Market and the ChiNext Artificial Intelligence Index each fell more than 4 percent, according to the same report.

Why AI hardware suppliers are exposed

The selloff has been tied to concern that the Democratic Party’s sweep in the US midterm elections could bring tighter limits on data-center development and slow demand for AI chips and related equipment, according to CNBC and the Financial Times. The Financial Times reported that US stocks lost $3.2 trillion in market value on Thursday and that the Nasdaq 100 fell 6.4 percent. CNBC reported that the Philadelphia Semiconductor Index dropped 12.2 percent.

Asian memory makers, foundries, equipment suppliers and electronics assemblers depend heavily on US data-center spending. Timothy Moe, chief Asia Pacific equity strategist at Goldman Sachs, told CNBC that position unwinding, stop-loss selling and higher volatility had made the regional declines worse. He also said political opposition to US data-center construction could weigh on demand and profits for Asian AI hardware suppliers.

Other markets also showed some risk aversion. The 10-year Treasury yield fell 5.7 basis points to 4.837 percent on Thursday. Gold was down 1.6 percent at $4,048.80 an ounce in Asian trading, and the US Dollar Index was up 0.2 percent at 101.77.

What to watch: futures and payrolls

Early in the Asian session, US stock index futures were higher after Thursday’s losses, according to Investing.com. That gives Wall Street a chance to steady before the Bureau of Labor Statistics releases the October nonfarm payrolls report at 8:30 a.m. Eastern time.

According to CNBC, the Dow Jones consensus forecast is for 59,000 jobs added in October, up from 29,000 in September, with unemployment expected to stay at 4.2 percent. That was the September rate in Labor Department data published through FRED. A weaker report would add to the growth worries that already hang over risk assets. A steady one could help the rebound in futures last into the US session, although the AI spending concerns behind this week’s selling are unlikely to ease on a single data release.