Asian equities opened sharply lower on Friday, with Japan's Nikkei 225 dropping 2.8% as a global retreat from semiconductor shares intensified. The broader MSCI Asia-Pacific index excluding Japan edged 0.1% lower, while US futures pointed to further losses, with Nasdaq 100 futures down 0.7% and S&P 500 contracts losing 0.4%.
Chip Sector Rout Deepens Despite TSMC's Strong Quarter
The latest decline reflects a broader recalibration of expectations for the artificial intelligence trade. After a powerful first-half rally, semiconductor and hardware stocks have come under pressure as valuations now depend on near-perfect execution. Even Taiwan Semiconductor Manufacturing Co.'s 77% increase in quarterly profit failed to stabilize the sector this week, reinforcing the view that strong AI demand is already priced in.
HSBC strategists noted that concerns about excess capacity have resurfaced, although underlying investment and earnings trends remain supportive. Asia is particularly exposed because chipmakers carry large weights in markets including Japan, Taiwan, and South Korea. South Korean markets were closed for a holiday after regulators unveiled measures to curb speculation in leveraged single-stock funds, including halting new listings and raising the minimum deposit to 30 million won.
Oil Surge Keeps Inflation Risk Alive
Brent crude rose 0.7% to $84.83 a barrel, heading for its strongest weekly advance since April. US crude traded near $79.50, with a similar weekly gain. The rally followed renewed US strikes on Iranian military targets, widening the risk premium around Middle East supply routes and raising the possibility of damage to energy infrastructure.
Macquarie strategist Thierry Wizman said Washington and Tehran appeared further from compromise, leaving markets vulnerable to further escalation. Higher oil prices complicate the relief delivered by softer US consumer and producer inflation data this week. Traders have reduced near-term Fed tightening bets but still price about 27 basis points of increases by December.
For more on the impact of oil on Asian markets, see Nikkei 225 Tumbles as Oil Surge and Iran Tensions Rattle Asian Markets.
Yen Weakness Deepens Japan's Pressure
The yen hovered near 162.4 per dollar, close to its weakest level in four decades, adding to the strain on Japanese assets. Finance Minister Satsuki Katayama again warned against excessive currency movements as traders remained alert to intervention. Tokyo is also considering ways to encourage the Government Pension Investment Fund and other large institutions to allocate more capital domestically.
UBS economist Daiju Aoki said repatriation expectations could temporarily support equities and lower government-bond yields, but that support may prove limited if earnings expectations weaken. For Asian markets, the immediate question is whether the chip retreat remains a valuation reset or develops into a broader challenge to the AI investment cycle.
For context on the broader Asian market selloff, see Asian Markets Tumble as Oil Surge on Strait Tensions Hits Chip Stocks and Bonds.
This article is for informational purposes only and does not constitute financial advice.
