KOSPI slides 3%, Nikkei drops 2.5% as AI rout deepens

South Korea's KOSPI fell 3% and Japan's Nikkei 225 slid 2.5% on Thursday as a selloff in artificial intelligence-related stocks resumed across Asia, erasing gains from a brief recovery earlier this week.

"The selloff is far steeper than what we're seeing in the U.S. market," said Yugo Tsuboi, chief strategist at Daiwa Securities. "With South Korea's market closed for a holiday earlier this week, investors haven't been able to fully digest semiconductor-related concerns, so some may be using the Japanese market as a hedge instead."

SK Hynix dropped more than 4% and Samsung Electronics fell over 3%, leading declines in Seoul. In Tokyo, semiconductor and AI-related stocks dragged the Nikkei lower, tracking overnight losses on Wall Street where the Nasdaq 100 slid 1.6% in futures trading. The KOSPI's decline pushed the benchmark back toward bear market territory after it had surged 5% on July 21 in its biggest single-day rebound from the AI selloff that began July 17, when the Nikkei plunged 5% to its lowest level since June 11.

The renewed selling reflects persistent concerns that AI-related valuations have become stretched following a historic rally in the first half of the year, analysts said. Investors are also weighing the impact of escalating U.S.-Iran tensions, which have pushed Brent crude above $100 a barrel and added to uncertainty over the inflation outlook. The selloff in chip stocks has been broad-based: memory chipmaker Kioxia Holdings plunged 16% on July 17, while Murata Manufacturing lost nearly 12% and TDK fell over 6% during the initial rout. The Nikkei closed more than 10% below its June 25 peak on July 17, marking a technical correction.

The latest declines come as traders await U.S. economic data and corporate earnings for further direction on the health of the global economy and the trajectory of interest rates. Federal Reserve officials have signaled they are in no rush to cut rates, with Dallas Fed President Lorie Logan saying Thursday that "modestly higher interest rates would better balance the outlook and risks."

This article is for informational purposes only and does not constitute investment advice.