Worry has ramped up that stocks are looking pricey.
South Korea’s equity benchmark Kospi plunged as much as 6.2 per cent on Wednesday, with memory makers Samsung Electronics Co and SK Hynix Inc among the biggest drags. In Japan, equipment firm Advantest Corp dropped 10 per cent, weighing on the Nikkei 225. Asia’s largest stock Taiwan Semiconductor Manufacturing Co fell 3.3 per cent. All are suppliers to Nvidia Corp.
Selling pressure trimmed roughly $500 billion in combined market capitalisation from the Philadelphia Semiconductor Index on Tuesday and a Bloomberg gauge tracking Asia chip stocks on Wednesday.
The selloff underscores how stretched the AI-fuelled rally has become with key indexes trading near record highs. Chipmakers have added trillions in market value since a low in April as investors bet on soaring demand for AI computing power. The pullback signals the growing unease over the sector’s earnings potential and sky-high stock valuations, particularly if interest rates stay higher for longer.
Wall Street chiefs’ warning of an overdue correction weighed on the sector, alongside reduced expectations for Federal Reserve rate cuts and the prolonged US government shutdown. Hedge fund manager Michael Burry added to the selloff with his disclosure of bearish wagers on Palantir Technologies Inc and Nvidia.
Palantir helped trigger the meltdown on Wall Street with a forecast that failed to impress investors. A similar reaction to Advanced Micro Devices Inc.’s post-market results and outlook amplified the impact on Asia’s trading session Wednesday.
“It’s a sea of red across broad markets, and one that offers a gloomy and damp portrayal of risk,” said Chris Weston, head of research at Pepperstone Group. “We need to remain open-minded to the possibility that this could still further build. Simplistically, there aren’t many reasons to buy here.”
Worry has ramped up that stocks are looking pricey. The Philadelphia SOX gauge is trading near 28 times estimate forward earnings, compared with its five-year average of less than 22 times.
Some see the pullback as a good thing, letting some steam out of a rally that had gotten ahead of itself, and making stocks a bit cheaper. With global hyperscalers like Amazon.com Inc and Meta Platforms Inc pouring more and more cash into AI, chipmakers and other tech firms are expected to reap further benefits in their results and share prices.
“I think it’s a necessary and, to some extent, healthy correction,” said Xin-Yao Ng, a fund manager at Aberdeen Investments. “There’s an AI bubble, not at the stage of bursting yet, but if the share price trajectory of some of these AI stocks continues, it will not take long to get into the final stage.”
For now, institutional and individual traders alike must grapple with day-to-day volatility. Goldman Sachs Group Inc’s Retail Favorites Index slid 3.6 per cent Tuesday, roughly triple the loss in the S&P 500 Index.
Vikas Pershad, an Asian equities portfolio manager at M&G Investments, was essentially up all night in Singapore following the market chaos.
“I followed until I went to bed, which is when the US closed at 4 am, took a short nap and then got ready for Asia,” he said. “We’ve come so far, so fast, investors shouldn’t be surprised if this continues tomorrow and the day after,” he said, adding that it’s a good time to watch for buying opportunities.
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Published on November 5, 2025
