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Tech market sell-off deepens amid fears over US inflation and AI debt
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Global markets deepened a sell-off in AI-linked shares on Thursday as investors confronted rising US inflation and the prospect of further interest rate hikes. South Korea's benchmark Kospi 200 index fell more than 8% overnight to a six-month closing low, triggering circuit breakers that halted trading at various points. Memory chip makers SK Hynix and Samsung Electronics plunged nearly 11% and 9.5%, respectively. The index closed down 8.1%, underscoring how quickly concerns over the heavily indebted AI sector can spread.
The retreat followed a slide on Wall Street in the previous session, where the Nasdaq Composite fell 1.9% and the S&P 500 dropped 1.1%, its worst performance since July. The trigger was US data showing inflation jumped to a higher-than-expected 3.7% in September. That marked the fastest price increase since the consumer price index hit a three-year peak of 4.2% in May. Investors now expect fresh interest rate increases from the US Federal Reserve, with some pricing in another hike as soon as the end of the month.
Asia's losses were broad. Japan's Nikkei 225 dropped 4.9% on Thursday after an 11% slump in memory chip maker Kioxia and a 10% drop in SoftBank, a major investor in ChatGPT owner OpenAI. China's Shanghai CSI 300 slipped as much as 2.4%, its lowest level since August 2025. In Taiwan, TSMC fell 2% despite reporting its sixth straight quarter of profits.
European stocks also skewed lower at the start of trading. The Europe Stoxx 600 was down 0.4%, the UK's FTSE 100 fell 0.06%, France's CAC 40 dropped 0.19%, and Spain's Ibex lost 0.17%. Germany's DAX fell 0.53%. In the US, stock futures pointed to further losses for tech stocks, with Nasdaq 100 futures dropping 1%.
Deutsche Bank analysts led by Jim Reid described an incredibly tumultuous 24 hours, saying a strong US CPI print was followed by mounting fears around the AI trade. Reid noted that this was not just an energy surge driving prices higher, as there were broad-based moves across the consumer basket. That suggests inflation pressures are entrenched beyond fuel costs, which have been pushed up by geopolitical tensions including the ripple effects from the US war on Iran.
The sell-off follows warnings from the International Monetary Fund, which said earlier this week that the threat of an AI share price crash rippling across global markets is putting world financial stability at risk. The IMF warned that the consequences of an AI correction could be global. Aside from the US, Asian markets would be most exposed, while the UK and eurozone could be more insulated, although investors with US holdings would be hit.
Looking ahead, traders are focused on the Federal Reserve's next moves and the debt loads of AI-related companies. Further rate increases could intensify pressure on a sector that has benefited from years of cheap money. The latest volatility highlights how sensitive AI-linked equities have become to inflation data and monetary tightening. With global markets interconnected, the risk of contagion remains a central concern.
