Asian stocks fall, following US tech-led selloff

Japanese and Australian equities both opened lower, while futures pointed to losses in Hong Kong.

• Asian stocks dropped; Japanese and Australian markets opened lower.
• Tech-heavy Nasdaq 100 dropped 1.6% as software stocks saw sharp declines
• Oil rose after US Navy shot down Iranian drone; Bitcoin extended its slide

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Most Asian stocks dropped after a tech selloff dragged down US benchmarks and saw a rotation into more economically sensitive industries.

Japanese and Australian equities both opened lower, while futures pointed to losses in Hong Kong. A drawdown in software makers weighed during US trading, dragging down the S&P 500 and Nasdaq 100 indexes. Shares of Advanced Micro Devices Inc. tumbled in late trading after the company, gave a disappointing sales forecast.

Despite losses in major benchmarks, most shares in the S&P 500 actually rose. FedEx Corp., an economic barometer, extended a record-breaking rally. Walmart Inc. topped $1 trillion. Oil climbed as the US Navy shot down an Iranian drone headed toward an aircraft carrier in the Arabian Sea. Bitcoin fell for a second day.

Bets on AI companies have dominated the US equity market for past three years, but a growing number of investors are now wagering that the run, led by the “Magnificent Seven” megacaps, is giving way to broader market participation. In fact, a marked rotation has taken place in 2026, with value shares far outpacing growth.

“Our sense is that markets are churning underneath the surface as worries over AI capital spending battle with ‘hopes and dreams’ of broadening out as a result of an accelerating US economy,” said Chris Senyek, a strategist at Wolfe Research.

The first wave of selling on Tuesday was in stocks associated with legal software and data services as shares of Experian Plc, London Stock Exchange Group Plc and Thomson Reuters Corp. tumbled. Then it snowballed to include most of the software sector, pushing the iShares Expanded Tech-Software Sector ETF down about 4.5%.

A Goldman Sachs basket of US software stocks sank 6% on Tuesday, its biggest one-day decline since April’s tariff-fueled selloff. The tech-heavy Nasdaq 100 Index fell 1.6%, trimming a drop of as much as 2.4%.

“Bifurcated action is characterizing today’s Wall Street trading, as tech surrenders the floor to cyclicals even as Palantir delivered a blockbuster beat-and-raise last night, which initially boosted optimism regarding AI prospects,” said Jose Torres at Interactive Brokers.

Bitcoin extended its almost four-month slide. The cryptocurrency’s slump through some important thresholds could have cascading effects leading to massive value destruction, investor Michael Burry said.

The dollar edged higher early Wednesday after dropping in the US session. Treasuries were little changed, with investors parsing the latest remarks from central bank speakers.

Federal Reserve Bank of Richmond President Tom Barkin said policy easing has bolstered the jobs market as officials now look to bring inflation back to the target. Fed Governor Stephen Miran said the absence of strong price pressures means rates need to be lowered again this year.