The global AI equity rout accelerated sharply in Asia on Thursday before losing force in European and US trading, as fears about the murky, circular financing behind the artificial-intelligence buildout rattled investors. South Korea’s KOSPI plunged 7.5% to a six-month low, while Japan’s Nikkei slid 5% — but the tech rout evaporated as Western markets opened.
By the close, the Nasdaq edged up 0.1%, the S&P 500 gained 0.3% and the Dow rose 1%, capping a volatile session. In Europe, Britain’s FTSE climbed 1% to a seven-week high. Eight of the eleven S&P 500 sectors rose, with healthcare up 2%, even as technology fell 0.5% and energy dropped 1.5%.
Still, safe-haven demand gave US Treasuries one of their best days in months, despite a surprisingly strong rise in US producer inflation that might otherwise have deepened the tech rout. The 10-year yield fell 10 basis points to 5.08% and the curve flattened, while the German Bund yield dropped 11 basis points to 3.35%, its lowest in over a month.
Tech rout: Asia’s AI selloff deepens
The trigger was growing anxiety about the debt burden behind the AI boom. South Korea’s KOSPI, a top-10 global index, has lost 20% of its value in barely a week, and CoreWeave’s 2032 bonds — issued just four months ago — have fallen below 80 cents on the dollar, a level typically considered distressed. The cost of insuring against major US AI firms defaulting has soared to record levels, spotlighting worries that the tech rout is as much about credit as about equity valuations.
The selloff has also revived debate about the circular financing at the heart of the AI boom. Chipmakers, cloud providers and model developers have struck a web of deals — equity stakes, purchase commitments and vendor financing — that critics say inflates demand figures while concentrating risk. Defenders counter that the spending reflects genuine computing demand, and point to the tech rout’s quick fade in Western hours as evidence the market can tell the difference.
Attention now turns to upcoming earnings from the largest AI spenders. Investors will be parsing capital-expenditure guidance for any sign that the buildout is slowing — or that the financing behind it is straining.
For portfolio managers, the episode is a reminder of how concentrated the rally had become. When a handful of AI-linked names drive index gains, any wobble in the tech trade can move entire markets — as Asia’s session proved overnight.
CoreWeave’s slump has become the symbol of the stress: shares in the AI cloud company swung wildly this week as investors questioned the sustainability of circular deals in which AI firms fund each other’s growth. The stock rebounded 6.5% on Thursday, but Hewlett Packard and Dell each fell 7%, and AI-linked credit worries sent default insurance to record highs.
Nike jumped 5% on company-specific news, a reminder that the selling has been concentrated in AI-exposed names rather than a broad market panic. Even so, the speed of the tech rout in Asia — the Nikkei’s 5% slide and the KOSPI’s plunge to a six-month low — shows how quickly sentiment can turn when financing doubts take hold.
Tech rout loses force in Western trading
In currency markets, the dollar slid in its biggest fall in six weeks, with the Swiss franc the biggest gainer at up 1% and the Brazilian real the biggest decliner at down 1.5%. Commodities were mixed: Brent crude was flat while WTI rose 3%, gold added 1% and silver climbed 3%.
Analysts say the key question is whether the tech rout marks a healthy repricing of AI euphoria or the start of a deeper credit event. With default insurance at records and billions in AI-related corporate debt trading at distressed levels, the next round of earnings and financing announcements will be closely watched.
For now, Western markets have stabilised — but Asia’s overnight session will be the next test of whether the tech rout has truly run its course.