Volkswacht Bodensee - Asian stocks mostly sink as AI worries hammer tech

Regional investors were unable to build on a second day of gains on Wall Street, where more data showing inflation easing pushed back bets on a Federal Reserve interest rate hike to later in the year.

Seoul's Kospi dived more than seven percent as chip titans SK hynix and Samsung each gave up around 10 percent amid growing anxiety that the AI rally -- which had pushed both firms to record highs this year -- has run its course.

Traders are questioning whether the vast sums pumped into the AI sector in recent years can vindicate the eye-watering valuations for some firms.

That comes after Dutch giant ASML, which makes cutting-edge machines to manufacture chips, reported a rise in second-quarter net profit and hiked its sales forecast for the full year.

Eyes are now on earnings from Taiwanese titan TSMC due later in the day.

While investors remain confident in the outlook for the AI sector, analysts said the trade had become too crowded.

"The Philadelphia Semiconductor Index had risen roughly 83 percent this year, valuations had stretched," wrote SPI Asset Management's Stephen Innes.

"Strong earnings and healthy demand can keep a trade alive, but they cannot prevent a correction when everyone already owns it."

He added that investors were not "suddenly questioning whether AI infrastructure demand exists (but) questioning how much of that demand has already been paid for in the share price".

"The numbers can still be excellent and the stocks can still fall. Once expectations have been pushed into the rafters, even a good result can arrive looking short," he said.

Elsewhere in Asia, Tokyo and Taipei -- both rich in tech firms -- suffered heavy selling, while Sydney, Shanghai and Wellington also dropped.

However, Hong Kong was the outlier, climbing more than one percent as Chinese chip firms, which have been beaten down this year, enjoyed another advance.

The weak performance across Asia came even after all three main indexes in New York ended higher thanks to hefty gains in tech giants including Apple, Amazon and Facebook parent Meta.

That came as figures showed US producer prices slipped 0.3 percent on-month in June thanks to lower energy prices as the US and Iran reached a truce to reopen the Strait of Hormuz and allow crude to pass through again.

Data from Tuesday showed consumer prices rising less than expected.

The readings soothed market worries that the Fed would hike borrowing costs this month, though analysts warned that the renewed hostilities, which have seen the US and Iran trade strikes for around a week, could undo the good work.

Crude prices ticked higher again Thursday as traffic through the strait -- through which a fifth of world oil and LNG passes -- thinned out.

On currency markets, the South Korean won strengthened slightly against the dollar after the country's central bank hiked interest rates for the first time since 2023 as it tackles stubborn inflation and an economy buoyed by strong chip exports.

And sterling held gains after rising more than one percent against the greenback on Wednesday following reports that Home Secretary Shabana Mahmood -- considered more reassuring to markets -- was a frontrunner to become the next finance minister.

- Key figures around 0230 GMT -

West Texas Intermediate: UP 0.6 percent at $80.11 a barrel

Brent North Sea Crude: UP 0.5 percent at $85.34 a barrel

Tokyo - Nikkei 225: DOWN 2.8 percent at 66,796.79 (break)

Seoul - Kospi: DOWN 7.1 percent at 6,765.38

Hong Kong - Hang Seng Index: UP 1.3 percent at 25,001.27

Shanghai - Composite: DOWN 0.8 percent at 3,925.47

Pound/dollar: DOWN at $1.3525 from $1.3530

Euro/pound: UP at 84.76 pence from 84.72 pence

Euro/dollar: UP at $1.1465 from $1.1463 on Wednesday

Dollar/yen: DOWN at 162.11 yen from 162.27 yen

M.Schneider--VB