Asian Markets Decline Amid Concerns Over AI Stocks and Middle East Tensions

Asian shares fell on Friday, marked by a significant drop in Tokyo’s Nikkei 225. The index decreased by 4% due to the substantial selling of computer chipmakers and other AI-related stocks. Although South Korean markets were closed, shares in Taiwan dropped 6.5% following a major announcement from TSMC. The company, the world’s largest contract manufacturer of computer chips, revealed its plan to invest an additional $100 billion in building new fabrication plants in the U.S. This led to TSMC’s share price falling 7.3% on Friday.

AI-related stocks have been experiencing a decline over the past few weeks. Investors are concerned about high prices and doubt whether the demand for computer memory and processors will remain strong if AI does not deliver the anticipated profitability and productivity.

Oil prices surged as conflict in the Middle East intensified. The United States expanded its airstrike campaign against Iran, targeting bridges and a tower at a critical port, aligning with pressure from President Donald Trump to address the situation. This action influenced the U.S. futures market, which saw a downturn.

In Japan, the Nikkei index reached lows not seen in over a month, with Tokyo Electron, a computer chip equipment manufacturer, plummeting 8.2%. Similarly, Advantest, a chip testing equipment maker, fell 7.2%, and SoftBank Group’s stock value dropped by 9%.

Elsewhere in Asia, Hong Kong’s Hang Seng index decreased by 2% to 24,501.89, and Shanghai’s Composite index fell 3.1% to 3,764.15. Australia’s S&P/ASX 200 saw a modest decline of 0.5% to 8,796.70.

Now investors are taking profits from the first-half winners and moving toward areas that were left behind, commented Stephen Innes from SPI Asset Management.

In the United States, the S&P 500 fell by 0.5% despite the fact that most stocks in the index showed gains. The Dow Jones Industrial Average decreased by 0.2%, while the Nasdaq composite dropped 1.5%. Nvidia’s stock declined 2.4%, significantly impacting the index. Other stocks benefitting from AI demand also witnessed declines.

Micron Technology’s stock price fell by 5.6%, reducing its annual gain below 199%. SanDisk experienced a 12.6% decrease but maintained a substantial 494% rise for the year. Western Digital dropped 9.2% yet remains up by 171% for the year.

The rise in oil prices was influenced by fears that the conflict involving Iran might hinder tankers from passing through the Strait of Hormuz. Brent crude oil, the international standard, increased by 1.1% to $85.13 per barrel. The U.S. benchmark crude rose 1.3%, reaching $79.95 per barrel.

Reports on Thursday about the U.S. economy were mixed. Shoppers spent less at U.S. retailers than expected, yet fewer workers applied for unemployment benefits, hinting at a strong job market. Additionally, the manufacturing industry in the mid-Atlantic region exceeded expectations.

In currency trading early Friday, the U.S. dollar fell to 162.19 Japanese yen from 162.38 yen. The euro appreciated to $1.1452 from $1.1443.