The decline comes after the Nasdaq, heavily weighted toward technology companies, fell more than 4.5% last week, raising concerns that valuations in the AI sector may have run ahead of fundamentals.
Leading the downturn were some of Asia’s largest technology companies. South Korean chipmakers Samsung Electronics and SK Hynix fell sharply, with Samsung dropping 5% and SK Hynix losing 2%. Their declines weighed heavily on the broader South Korean market, contributing to a steep fall in the benchmark Kospi Index.
Taiwan's technology sector also faced pressure. Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest contract chipmaker, declined 2.1%, while electronics manufacturer Foxconn dropped more than 5%, reflecting growing investor caution toward companies tied to the AI supply chain.
In Japan, technology-focused investment giant SoftBank Group led regional losses, plunging more than 7%. Semiconductor equipment manufacturers Tokyo Electron and Advantest also recorded significant declines as investors reduced exposure to chip-related stocks.
The latest sell-off follows a remarkable rally that had driven technology shares to record valuations on expectations of sustained growth in artificial intelligence investments. Several major companies had recently reached historic market capitalizations, supported by optimism surrounding AI infrastructure spending and demand for advanced semiconductor technologies.
Market sentiment shifted after U.S. semiconductor company Broadcom reported quarterly revenue that fell short of analyst expectations. The earnings disappointment triggered a wave of selling across global technology markets, raising concerns about whether the pace of AI-related spending can continue to justify elevated valuations.
The weakness spread quickly across semiconductor-focused investments. Industry-related exchange-traded funds and major chip companies in the United States experienced substantial losses, creating ripple effects throughout Asian markets at the start of the trading week.
According to market analysts, the recent correction wiped out approximately $1.8 trillion in market value from companies included in the S&P 500 Index, highlighting the scale of the technology sector retreat.
Despite the sharp decline, some analysts remain optimistic about the long-term outlook for artificial intelligence and technology investments. Continued innovation, growing enterprise adoption of AI solutions, and upcoming technology-related public offerings are expected to keep investor attention focused on the sector.
Beyond technology stocks, broader Asian markets also faced additional pressure from geopolitical uncertainty. Investors remain cautious amid escalating tensions in the Middle East, with concerns that ongoing conflicts could impact global economic growth, energy markets, and investor confidence.
Market participants are expected to closely monitor upcoming corporate earnings reports, economic data releases, and developments in the AI industry to determine whether the current pullback represents a temporary correction or the beginning of a more sustained reassessment of technology sector valuations.
