US chip stock sell-off drags down Asia-Pacific markets, South Korean stocks trigger circuit breaker, SK Hynix down 7%, oil prices continue to fall, gold stabilizes above 4000.

Investors' concerns about overvaluation of artificial intelligence (AI) concept stocks triggered a sharp sell-off in Wall Street's chip sector, and this panic quickly spread to the Asia-Pacific markets. During early trading, Asia-Pacific stock markets generally came under pressure, with the South Korean stock market becoming a hard-hit area and triggering a circuit breaker. At the same time, the dovish signals from the Federal Reserve and the continued decline in international oil prices are reshaping global market risk appetite.

The sell-off in Asia-Pacific markets intensified rapidly in early trading. After opening 4.5% lower, the Seoul Composite Index (KOSPI) quickly expanded its intraday losses to over 6%, falling below the 7,800-point mark. Due to a 5% plunge in KOSPI 200 futures, the Korea Exchange triggered a circuit breaker, suspending program trading for 5 minutes. Heavyweight chip stocks led the market decline, following the overnight drop in U.S. tech stocks, with SK Hynix falling 7.6% in early trading and Samsung Electronics dropping 6.5%.

The downturn was not limited to South Korea. The Nikkei 225 index opened 0.6% lower and then expanded its intraday losses to 2%. The MSCI Asia-Pacific Index fell 1% overall. The direct trigger for this regional plunge was the turbulence in the U.S. stock market overnight, with the U.S. semiconductor stock index plummeting 6.3% on Wednesday and S&P 500 futures continuing to fall 0.2% during the Asian session.

Meta's strategic shift overnight was the core trigger for yesterday's U.S. stock market decline. Meta plans to sell excess computing power, shattering the belief in "absolute scarcity of computing power," causing its stock price to surge 10% in a single day, its best performance of the year, while chips and other AI hardware suffered heavy losses.

While the stock market is under pressure, the macro fundamentals have shown marginal easing. Federal Reserve Chairman Kevin Warsh's latest remarks significantly reduced market concerns about a near-term interest rate hike. At the same time, driven by progress in Middle East peace negotiations, international crude oil prices have quickly fallen, providing support for alleviating global inflationary pressures.

Meta shifts to sell "excess computing power," becoming the core trigger for the chip stock crash

According to Bloomberg, Meta is building a new business, planning to sell its excess computing capacity to external customers for revenue. This strategic shift has broken the market's core belief in "absolute scarcity of computing power," signaling a turning point in market tolerance for tech giants' unrestrained capital spending.

This news triggered extreme polarization in the secondary market. Meta, which proactively signaled a reduction in spending, saw its stock surge 10% in a single day, its best performance of the year; while traditional AI hardware beneficiaries—semiconductor giants, memory chip manufacturers, and emerging cloud service providers—suffered heavy losses. Star stocks like Nvidia and Micron experienced a fierce sell-off, directly leading to a complete collapse of momentum strategies.

Wall Street institutions widely interpret this as a major narrative shift in the AI investment cycle. Goldman Sachs warns that the market's core premise has always been computing power scarcity; once supply increases and leasing prices fall, the scarcity narrative will be directly overturned, and the hardware sector will feel the pain first. The focus of capital is rapidly shifting from pure hardware infrastructure construction to corporate free cash flow stability and computing power utilization, with investors using real money to reward tech giants that demonstrate financial discipline.

AI valuation concerns reshape market logic. According to Bloomberg, the market is increasingly worried that the AI-driven stock market rally has become disconnected from fundamentals. This sentiment erupted in the overnight Wall Street market and directly dragged down Asian economies' stock markets that are highly dependent on chip exports.

On the inflation front, the Bank of Korea noted in its latest morning statement that July's CPI inflation rate would ease compared to June.

However, the bank also warned that inflation is expected to remain high for some time. The marginal easing of domestic inflationary pressures failed to offset the direct impact of external tech stock sell-offs on capital markets.

Warsh sends dovish signals, cooling expectations for a July rate hike

Amid stock market turmoil, the Fed's policy path has become a key factor in stabilizing market sentiment. Fed Chairman Kevin Warsh said at the European Central Bank's annual forum in Sintra, Portugal, that inflation expectations have moderated over the past month and price risks have declined in recent weeks. He also reiterated his commitment to bringing inflation back to the 2% target.

This statement was interpreted by the market as a signal that the Fed is not in a hurry to raise interest rates. Evercore's Krishna Guha commented: "At a minimum, his remarks do not provide any fuel for speculation about a near-term rate hike in July. In our view, this suggests the new Fed chairman currently sees no reason for an immediate rate hike, although he keeps all options open for each meeting."

The resilience of U.S. economic data also provided support for the market. U.S. manufacturing expanded for the sixth consecutive month in June, and the surge in input costs caused by the war has eased. Printing, electrical equipment, and textiles led the gains, while paper products, furniture, and wood products contracted.

Raymond James Chief Economist Eugenio Aleman said: "Overall, the report indicates that manufacturing continues to be resilient and supports our view that the U.S. economy is reaccelerating, with economic growth still expected to reach about 2.4% this year."

Currently, market attention has turned to Thursday's U.S. employment report. Barclays Private Bank and Wealth Management Chief Market Strategist Julien Lafargue noted that since Warsh views inflation as the primary concern, the June non-farm payroll data is "unlikely to change interest rate expectations on its own." He also added that hiring related to the FIFA World Cup is expected to distort the data.

International oil prices fall sharply

The continued decline in the crude oil market has provided some breathing room for the global market. Brent crude fell 0.8% to $71 per barrel, its lowest level since the U.S. and Israel's attack on Iran at the end of February. WTI crude also fell 1.1% to $67.80 per barrel. Trump publicly commented: "Oil prices are falling rapidly."

The core driver of lower oil prices comes from positive developments in Middle East geopolitics. According to Bloomberg, citing a senior U.S. government official, U.S. negotiators Steve Witkoff and Jared Kushner held constructive discussions in Qatar, technical talks with Iran are making progress, and parties are trying to convert the temporary peace agreement into a plan to permanently end the war.

Iran's official news agency (IRNA) quoted Deputy Foreign Minister Kazem Gharibabadi as saying that Tehran has set up working groups to discuss the implementation of the current agreement and negotiate a final peace deal, although no talks have yet taken place.

Jefferies' Mohit Kumar commented: "We are optimistic on the geopolitical front. This is not to say we think a comprehensive agreement will be reached; it may be more of a compromise. But as long as the strait remains open and oil continues to flow, the market may become less sensitive to geopolitics."

Additionally, gold remains above 4,000, edging up 0.3%.

Tech giants accelerate strategic adjustments

Against the backdrop of macro and industry turmoil, global tech giants are also accelerating business adjustments.

The global shortage of memory chips has forced Apple to raise prices across its entire product line. At the same time, Meta is planning a cloud infrastructure business, offering access to AI computing power and models. This move puts it in direct competition with industry leaders such as Amazon Web Services, Microsoft Azure, and Google Cloud.

Furthermore, Google was ordered to pay nearly $2 billion to the Pricerunner unit of Klarna Group Plc for abusing its power in the comparison shopping services market.

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