Tech Selloff Drags Tokyo and Seoul Markets Lower Amid Geopolitical Tensions

Divergent Regional Performance

Asian equity markets moved in different directions Monday, with sharp losses in technology-heavy bourses contrasting with gains elsewhere in the region. Tokyo's Nikkei 225 fell 1% to close at 68,704.70, extending Friday's 4.2% decline. South Korea's Kospi dropped 2% to 8,246.50, following a 5.8% retreat in the previous session.

The selloff centered on artificial intelligence-linked stocks. SoftBank Group, the multinational investment firm with stakes in OpenAI, tumbled 5.9% after losing 12.5% Friday. In Seoul, Samsung Electronics declined 6%, while memory chipmaker SK Hynix slid 4.5%.

Hong Kong's Hang Seng bucked the trend, climbing 2.1% to 23,153.89, and the Shanghai Composite added 0.2% to 4,034.08. Taiwan's Taiex recovered some ground with a 1.1% gain after dropping 3.6% Friday. Australia's S&P/ASX 200 advanced 0.4% to 8,798.00, while India's Sensex traded nearly flat.

Valuation Concerns Hit Chip Stocks

Japanese and South Korean markets have surged in recent months as technology companies benefited from global demand for semiconductors and high-performance components used in artificial intelligence systems. Recent questions about AI valuations have trimmed those gains, prompting investors to reassess positions in previously high-flying tech names.

The correction follows similar moves on Wall Street, where major technology stocks closed lower Friday. Micron Technology dropped 6.7%, Intel fell 3.4%, Nvidia declined 1.6%, and Advanced Micro Devices slipped 2.1%. The S&P 500 edged down less than 0.1% to 7,354.02, while the technology-heavy Nasdaq Composite lost 0.2% to 25,297.62.

US futures pointed higher Monday morning in Asia, suggesting some stabilization after Friday's volatility.

Oil Prices Edge Higher

Brent crude, the international benchmark, rose 0.7% to $73.27 per barrel Monday. US benchmark crude gained 0.8% to $70.02 per barrel. Both grades remained close to levels seen before February, though still elevated from historical norms.

Weekend developments in the Middle East added fresh uncertainty to energy markets. Attacks on Bahrain and Kuwait followed earlier US military operations, raising concerns about shipping routes through strategic waterways.

ING commodities strategists Warren Patterson and Ewa Manthey noted Monday that traders may be underestimating risks to oil supply, particularly regarding the timeline for any recovery in Persian Gulf output. Questions about vessel safety in the Strait of Hormuz have intensified following recent maritime incidents.

The strategists suggested current market positioning reflects excessive optimism about supply normalization, leaving prices vulnerable to upward pressure if disruptions prove more persistent than anticipated.

Currency and Cross-Border Flows

The US dollar edged slightly higher to 161.81 Japanese yen from 161.71 yen. The euro held steady at $1.1386.

Currency movements remain a key consideration for Asian exporters, particularly in Japan and South Korea where technology manufacturers derive significant revenue from overseas markets. A stronger dollar can pressure margins for companies reporting earnings in local currency.

Taiwan's chipmaking sector showed resilience Monday, with the Taiex recovering after Friday's decline. Taiwan Semiconductor Manufacturing Company and other island-based producers have benefited from structural demand for advanced chips, even as near-term sentiment around AI stocks has cooled.

Market Outlook

The divergence between Northeast Asian tech-heavy indices and broader regional markets highlights investor caution around elevated valuations in specific sectors. While concerns about AI stock pricing have triggered short-term volatility, underlying demand for semiconductors and advanced components remains robust across industries from data centers to automotive manufacturing.

Geopolitical developments continue to inject uncertainty into energy markets, with potential implications for inflation expectations and central bank policy across Asia. Investors will monitor both earnings reports from major technology companies in coming weeks and any further shifts in Middle East tensions that could affect oil supply routes.

Regional equity flows suggest selective positioning, with investors moving toward Chinese stocks and away from the most stretched AI-related names in Japan and South Korea. Whether this rotation proves temporary or signals a broader reassessment of technology sector multiples will depend on upcoming earnings data and clarity around AI monetization timelines.