Asian stocks drop after AI jitters hit Wall Street

The sharp swings in US trading reflected the rising stakes tied to the AI boom and the unpredictable ripple effects across sectors, regions and asset classes.

• Asian stocks fell after US tech selloff on AI concerns
• Gold and Bitcoin rebounded as Treasuries held prior gains
• US and Taiwan finalized a deal to lower tariffs and boost trade

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Asian equities retreated from a record after concerns over the impact of artificial intelligence on various sectors spurred a selloff in US technology stocks and sent investors to the safety of Treasuries.

The MSCI Asia Pacific Index dropped 0.7%, its first fall in six sessions, with losses in Japan and South Korea. That came after the S&P 500 fell 1.6% and the Nasdaq 100 dropped 2% Thursday with megacaps slumping. The downdraft spread to areas including logistics and commercial real estate, in a sign investors are worried about the impact of AI.

Even so, some signs emerged in early Asian trading the cross-asset selloff may be easing. Applied Materials Inc. surged 10% in late trading after a surprisingly upbeat sales forecast. Gold recouped some of Thursday’s losses when algorithmic traders had appeared to amplify the precious metal’s sudden drop. Bitcoin also edged higher after four days of losses.

Treasuries held their gains from the prior session when the cross-asset weakness sent investors to the perceived safety of US government bonds. Yields on the benchmark 10-year gained almost one basis point to 4.11% on Friday.

The sharp swings in US trading reflected the rising stakes tied to the AI boom and the unpredictable ripple effects across sectors, regions and asset classes. The moves highlighted how quickly shifts in sentiment around AI can reverberate far beyond the technology sector, with precious metals tumbling and traders plowing money into Treasuries.

“Software stocks are now trading like banks in 2008,” said Nick Ferres, chief investment officer of Vantage Point Asset Management in Singapore, referring to the global financial crisis. “Asia has performed well so far this year, but I am concerned about correlation to global markets and a tactical unwind,” he said.

Thursday’s losses erased the year-to-date gains for the S&P 500. In comparison, the MSCI Asia Pacific Index is up more than 12% this year, building on gains in each of the past three years.

Also, technology shares have performed well with MSCI’s gauge for the sector up 22%. The Kospi Index in South Korea, a poster child for AI investments, has gained 31% this year and is the world’s best-performing stock market this year.

A key event for markets is coming up later Friday with the release of US January inflation data. The median forecast is predicting a year-over-year increase of 2.5% for the core consumer price index, which strips out food and energy.

Traders continued to assign little chance that Federal Reserve officials will lower rates when they meet next in March, with a July cut fully priced in.

Friday’s inflation print has gained added significance after Wednesday’s jobs numbers indicated strength in the US economy. That prompted traders to pare bets on interest-rate cuts by the Federal Reserve. Money markets pushed back bets for an easing to July from June previously.

Markets are complacent on the outlook for US inflation, making trades that pay out if price pressures climb look attractive, said Benjamin Wiltshire at Citigroup Inc. Investors may be underestimating the resilience of the US consumer and market expectations for inflation are likely to be revised slightly higher, he noted.

“Markets seem to have this conviction that inflation is going to come down,” Wiltshire said in an interview. “We’re still in a structurally higher inflation environment.”

In commodities, oil slid on Thursday as risk-averse sentiment pervaded global markets and investors digested fresh developments in US-Iran tensions that continue to cloud the supply outlook.

Anthropic, meanwhile, completed a deal to raise $30 billion in funding from investors at a $380 billion valuation, including the money raised. Elsewhere, OpenAI has warned US lawmakers that its Chinese rival DeepSeek is using unfair and increasingly sophisticated methods to extract results from leading US AI models, according to a memo reviewed by Bloomberg News.

In trade developments, the US and Taiwan finalized an agreement to lower tariffs, boost market access for American products in Asia and direct billions of dollars into US energy and technology projects.