Global tech stocks, particularly those linked to AI, experienced a significant sell-off across Asia and Europe, extending declines seen in the U.S. Nasdaq. This downturn was triggered by Broadcom’s missed revenue estimates and exacerbated by expectations of higher U.S. interest rates, wiping out an estimated $1.8 trillion from the S&P 500 market cap. Major players like Samsung, SK Hynix, TSMC, and SoftBank saw substantial drops, reversing a recent rally driven by AI optimism.
Technology shares across Asia and Europe faced a continued downturn on Monday, as investor enthusiasm for AI-related companies cooled following a significant more than 4.5% decline in the U.S. tech-heavy Nasdaq index last week.
Leading memory chip manufacturers and major constituents of South Korea's Kospi Index, Samsung Electronics and SK Hynix, concluded Monday's trading session with substantial drops of 10.18% and 7.68% respectively. Their combined weight, accounting for over 40% of the index, contributed to the Kospi's broader decline of up to 8%.
Elsewhere, Taiwan Semiconductor Manufacturing Co (TSMC) experienced a 2.96% dip, and Hon Hai Precision, widely recognized as Foxconn, saw its shares fall by 5.27%.
In Japan, tech investment giant Softbank Group plummeted by 6.1%. Semiconductor equipment makers Tokyo Electron and Advantest also suffered losses, declining 7.45% and 5.72% respectively.
The negative sentiment spread to European chip stocks, which mirrored their Asian counterparts. Early trading saw ASML, Infineon, STMicroelectronics, ASM International, and Besi each register declines ranging from 3% to 4.5%.
This market downturn was intensified by a prevailing 'risk-off' mood among investors, fueled by projections that U.S. interest rates might remain elevated for an extended period. This outlook follows last week's robust U.S. labor market data, which significantly surpassed expectations.
Goldman Sachs noted on Friday, stating, "We are pushing the final two rate cuts in our Fed forecast back to June and December of 2027. The labor market has been stronger than we anticipated," indicating a revised monetary policy outlook.
These widespread share price declines stand in stark contrast to a recent rally in Asian tech stocks, which had been propelled by strong investor confidence in AI demand. Just last month, both Samsung Electronics and SK Hynix achieved a staggering $1 trillion market valuation, and SoftBank recently claimed the title of Japan's most valuable company.
The catalyst for this tech sell-off was Broadcom's fiscal second-quarter revenue report last week, which fell short of market expectations. This disappointment sent Broadcom's shares plummeting and initiated a ripple effect across the broader technology sector.
On Friday, the VanEck Semiconductor ETF (SMH) saw a loss of over 9%, while Softbank's U.K.-based chip design firm, Arm Holdings, fell by nearly 13%. Micron Technology also experienced a substantial drop, declining more than 13%.
A UOB note on Monday highlighted the scale of the impact, stating, "The tech-led rout erased approximately $1.8 trillion in S&P 500 market cap."
Despite the current downturn, UOB expressed optimism, suggesting that tech and software companies would soon regain focus, particularly with the anticipated debut of a new space exploration/AI/tech company on the Nasdaq on Friday, June 12th, potentially marking the largest IPO in history.
Adding to the cautious market sentiment, broader Asian markets were also down on Monday, following a renewed escalation in the ongoing Iran conflict, signaling that regional tensions persist.
Image Credit: Sinology | Moment | Getty Images
Mike Sheen of CNBC contributed to this report.
