South Korean and Japanese equities fell sharply on Friday as concerns over the sustainability of heavy AI infrastructure spending combined with a spike in oil prices to drive a broad risk-off move across Asia. The selloff was severe enough in South Korea to trigger automatic trading curbs on both of the country’s major stock indices.

The Korea Exchange activated a sidecar mechanism on the KOSPI after the index fell around 5.5%, temporarily halting program trading. Sidecar curbs are designed to slow rapid moves by pausing certain automated trades rather than closing the market entirely. A similar curb was triggered on the KOSDAQ after futures on that market fell by more than 6%. The KOSPI’s decline partly reversed gains accumulated over the previous three sessions, with major chipmakers among the hardest-hit stocks.

Samsung Electronics dropped around 7%, while SK Hynix fell by a similar margin. Battery maker LG Energy Solution also declined sharply. Foreign investors were net sellers of several hundred million dollars’ worth of South Korean shares. Even so, the won strengthened to its highest level in roughly 11 weeks against the dollar, indicating that the currency move was not simply mirroring the equity selloff.

South Korea’s financial regulator also said it is bringing forward the start date for a higher deposit requirement on retail trading of single-stock leveraged ETFs to July 31, as part of an effort to address market volatility. The Financial Services Commission said retail investors will need to hold a cash deposit of around 30 million won, or roughly $20,000, to trade these products. The requirement had previously been planned for sometime in August.

The regulator said the measure is intended to curb speculative retail trading. The approval in late May of domestic single-stock leveraged ETFs tied to Samsung Electronics and SK Hynix has drawn criticism for contributing to heightened market volatility. Because leveraged ETFs are designed to amplify daily moves in their underlying stocks, sharp swings in heavily weighted chip shares can quickly feed through to retail trading activity.

The trigger for the technology-led decline came from Wall Street overnight, where shares of Google parent Alphabet sank sharply after the company reported higher spending plans alongside notable cash burn. The results revived investor concern about whether returns from AI infrastructure investment are keeping pace with the scale of spending. Other major U.S. technology stocks also fell, and the Nasdaq closed down by more than 2%.

Asian chipmakers and broader equities were pressured by two separate forces: an AI spending scare from Wall Street and an oil shock linked to the Middle East. South Korea’s chipmakers, along with Taiwan’s TSMC, have been among the largest beneficiaries of the AI spending boom, leaving them particularly exposed to any sign of moderating capital expenditure among large U.S. hyperscalers.

Chipmakers bore the brunt of the selling because of their direct exposure to potential changes in hyperscaler capital expenditure. The broader selloff reflected a reassessment of AI infrastructure spending sustainability following Alphabet’s results, while the oil price shock added a fresh inflation dimension to the risk-off tone.

Japan’s Nikkei fell by more than 2.5%, while the broader Topix declined around 1.3%. The move extended the Nikkei’s decline for the month to more than 7%, pushing the index deeper into correction territory. Strategists noted that the index has recently been driven largely by overseas factors, including movements in the KOSPI and the U.S. Philadelphia semiconductor index, rather than by domestic developments.

One strategist suggested that the trend could shift once Japan’s corporate earnings season, which begins this week, provides a clearer read on demand.

Brent crude’s climb back above $100 a barrel amid the widening Middle East conflict added to the negative tone across the region. The move revived fears of a fresh inflation shock and compounded the pressure already generated by concerns over AI spending. Higher oil prices are closely watched in Asia because many of the region’s major economies depend heavily on imported energy, making sustained price increases a potential drag on margins, household costs and inflation expectations.

With Brent back above the psychologically significant $100 level, traders treated the combination of a technology valuation reset and an energy-driven inflation scare as a double headwind rather than a single-factor move. The won’s rise to an 11-week high despite the equity rout suggested that at least some flows reflected defensive positioning rather than a broad-based exit from South Korean assets.

The session left Asian equities, particularly semiconductor-related stocks, caught between concerns about the durability of AI-related capital expenditure and renewed inflation risks from higher energy prices.