Global capital is repricing AI and semiconductors again.

Last night, the Philadelphia Semiconductor Index fell 4.29%, the Nasdaq fell 1.47%, and TSMC’s ADR also fell 2.32%. This wave of selling pressure is feeding back into Asia today. In the intraday session, the Taiwan stock market briefly dropped to around 43,643 points, down about 4.3% from the previous day’s close; the Nikkei also briefly fell by 931 points in the morning.

Why, after TSMC turned in such strong financial results, is the market still selling?

Because market trading is never just about good or bad—it’s about how much the actual outcome differs from what people originally expected.

TSMC’s second-quarter net profit rose 77% year over year. Its third-quarter revenue guidance and full-year growth outlook are strong, and the company also increased this year’s capital expenditures to $60 billion to $64 billion. These figures show that AI demand hasn’t suddenly disappeared.

But it also brings up another problem: the money that will need to be spent next.

Once AI-related stocks have already surged a lot, what investors demand is no longer only revenue growth. They also want to know whether these massive investments can be converted into cash flow, whether overseas capacity expansion will compress gross margins, and how long customers’ AI budgets can hold up.

In other words, this time doesn’t look like the company suddenly got worse. It looks more like the company’s performance is good, yet it still hasn’t cleared the very high bar that the market has already raised.

Why did the Taiwan market react the most?

Because the Taiwan stock index is highly concentrated in TSMC and electronic heavyweight stocks. If U.S. semiconductor stocks see broad selling pressure, the move can be amplified, layer by layer, through TSMC’s ADR, the Taiwan stock index futures, and electronic heavyweight stocks into the entire index.

Japan’s market structure is also very similar. Semiconductor equipment and high-priced AI stocks such as Tokyo Electron, Advantest, and Disco have an especially large impact on the Nikkei index. On top of that, with Japan’s market about to enter a three-day consecutive holiday, short-term capital is less willing to take on volatility before the weekend, making the losses more likely to be magnified.

Korea has two additional factors of its own.

First, the KOSPI is highly dependent on Samsung Electronics and SK hynix. Yesterday, the two companies fell 8% and 11%, respectively, meaning the drag on the index is very direct.

Second, the Bank of Korea raised interest rates to 2.75% yesterday and also warned about risks related to inflation, exchange rates, home prices, and household debt. Rate hikes may not be the only reason for this selloff, but when semiconductor stocks have already started to weaken, it removes a reason for the market to absorb risk.

So although the three markets appear to be diving together, underneath it is actually the same global factor—plus three different amplifiers.

The common factor is a cooling in AI-semicondutor trading.

Taiwan’s amplifier is the concentration in heavyweight names. Japan’s is the impact of high-priced semiconductor stocks on the Nikkei and the wait-and-see sentiment ahead of the holiday. Korea’s is the two memory-chip giants, the central bank’s rate hikes, and ETF fund flows.

At this stage, it’s still not possible to directly conclude that the AI rally is over. TSMC’s orders, gross margin, and third-quarter guidance do not support such a strong claim.

What to watch next is whether the selling pressure stays limited to the semiconductor stocks that led the prior run-up—or whether it starts spreading into financials, domestic demand, and the credit market.

If it’s only a correction in overvalued AI stocks, it looks more like the market is cooling. But if fundamental guidance also begins to be downgraded, and the selloff spreads into other industries, that’s when the risk level truly changes to another tier.

This morning: 5 other things

1｜The Taiwan stock market breaks below 44,000 points intraday

As of before the reporting cutoff, the Taiwan Weighted Index was around 43,643 points, down about 1,982 points, or 4.3%, from the previous day’s close. These are intraday figures; the price may still move significantly before the close.

2｜The Nikkei faces pressure for the second straight day

The Nikkei index opened today down about 496 points, and in the early session the decline widened at one point to as much as 931 points. Semiconductor equipment, AI, and electronic component stocks were among the biggest decliners, but retail, transportation, and some services stocks were relatively supportive.

3｜Korean stocks are not open for trading today

South Korea’s securities market is closed for Constitution Day. The KOSPI fell 6.3%, Samsung Electronics fell 8%, and SK hynix fell 11%—all reflecting the July 16 closing results.

4｜PHLX sinks hard, becoming the starting point for Asia’s selling pressure

The Philadelphia Semiconductor Index fell 4.29% last night, clearly larger than the Dow’s 0.20% decline. Selling pressure is concentrated in semiconductor and AI-related groups; not all U.S. stock industries fell by the same magnitude.

5｜Strong earnings don’t mean the stock price will rise immediately

TSMC’s second-quarter net profit rose 77% year over year, and it raised its full-year growth and capital expenditure outlook. However, the ADR still fell 2.32%. The market is currently focusing more on high expectations, the return on capital expenditures, and future gross margins—not just the quarterly earnings.

Data cutoff: 2026-07-17 10:45 (Singapore time)