Renewed fears over the sustainability of artificial intelligence related capital spending triggered a sharp selloff in Asian technology and semiconductor stocks, hitting Japan's Nikkei and forcing a sell-side circuit breaker on South Korea's KOSPI. The selloff underscores how sensitive Asian semiconductor and AI-exposed equities have become to shifts in expectations around the massive infrastructure buildout underpinning the global AI boom, with investors increasingly scrutinizing whether the scale of capital being deployed will translate into commensurate revenue growth.

Japan's Nikkei share average fell around 2% on Thursday, weighed down by heavyweight technology names even as most other stocks on the index posted gains. The tech-heavy benchmark briefly fell just over 2% before settling roughly 1.8% lower on the day. Of the index's 225 components, more than twice as many stocks rose as fell, underscoring that the losses were concentrated rather than broad-based.

The declines followed an overnight slide in US-listed chipmaker AMD and space technology company SpaceX, which reignited investor concerns about the scale of capital being poured into AI infrastructure. Heavily weighted AI-related names bore the brunt of the selling, with AI-focused investor SoftBank Group falling around 6.5%, chip equipment maker Tokyo Electron dropping roughly 6%, and chip testing equipment manufacturer Advantest slipping around 4%. SoftBank Group was due to report earnings after the market close, making it an immediate focal point for investors looking for fresh signals on AI-related investment performance.

By contrast, Japan's broader Topix index fell a much smaller approximately 0.4%, highlighting how concentrated the selloff was in semiconductor and AI-adjacent names. Nomura Securities equities strategist Wataru Akiyama said the outsized weighting of semiconductor-related stocks in the index made the selloff appear more severe than the underlying shift in market sentiment. He added that the broader market found support from falling oil prices tied to hopes for a Middle East peace deal, which cushioned the overall market impact outside of the tech sector.

The pressure was even more pronounced in South Korea, where the KOSPI index plunged sharply enough to trigger a sell-side circuit breaker. The mechanism suspends the effectiveness of program sell orders for five minutes when KOSPI 200 futures fall 5% or more within a single minute compared with the previous day's close. According to the Korea Exchange, the circuit breaker was activated shortly after 10am local time.

The KOSPI opened down around 1.8% from the previous close and extended its losses through the morning session, falling roughly 4.6% and dropping below the closely watched 6,300 level. Korean semiconductor bellwethers led the decline, with Samsung Electronics falling around 6% and SK Hynix dropping roughly 9%, reflecting the intensity of the selloff among chip-focused names most exposed to the AI spending narrative. Both companies are central suppliers of high-bandwidth memory chips used in AI accelerators, tying their valuations closely to demand forecasts for AI data center buildouts. The scale of Korea's decline signals particularly acute stress in Korean semiconductor names and could keep volatility elevated across the region's chip sector in the near term.

Earlier, Fitch said Korea equity volatility poses limited near-term credit risk.

Together, the moves in Tokyo and Seoul illustrate how quickly sentiment toward AI-related capital expenditure can shift across regional markets, with a single overnight move in US chip and space technology stocks translating into significant single-day losses for some of Asia's largest technology and semiconductor companies. With major US tech companies continuing to commit tens of billions of dollars to AI infrastructure, upcoming earnings reports and capex guidance from industry leaders are likely to remain key catalysts for the sector's direction.