An accelerating sell-off of AI-linked shares has sent shockwaves through global markets, driven by rising inflation fears and concerns over future interest rate hikes. South Korea’s benchmark Kospi 200 index plummeted more than 8% overnight, reaching a six-month closing low, as traders reacted to the heavily indebted sector’s vulnerabilities. This downturn triggered circuit breakers, halting trading at various points throughout the day.
Notably, semiconductor giants SK Hynix and Samsung Electronics saw their stock prices tumble nearly 11% and 9.5%, respectively. The Kospi 200 index ultimately closed down 8.1%. Meanwhile, Japan’s Nikkei 225 index fell by 4.9%, influenced by significant drops in memory chip maker Kioxia and SoftBank, a major investor in OpenAI, which owns ChatGPT.
The sell-off followed a troubling session on Wall Street, where the Nasdaq Composite dropped 1.9% and the S&P 500 fell 1.1%, marking its worst performance since July. As trading resumed on Thursday, US stocks continued to decline, with the Nasdaq falling another 1.4%. Companies like Dell and Coherent, which manufacture components for AI data centers, led the early declines.
The catalyst for this market turmoil was the release of US inflation data, which showed a higher-than-expected increase of 3.7% in September, the fastest rise since the consumer price index (CPI) peaked at 4.2% in May. Additionally, fresh data revealed that US producers raised their prices by 6.3% year-on-year in September, the sharpest increase since December 2022, further fueling inflationary concerns.
Investors are now bracing for potential interest rate hikes from the US Federal Reserve, with some speculating that an increase could come as soon as the end of the month. Deutsche Bank analysts noted, “Markets have just had an incredibly tumultuous 24 hours, as a strong US CPI print was then followed up with mounting fears around the AI trade.” They emphasized that the inflation surge was not solely driven by energy costs, which have been affected by geopolitical tensions, including the US war on Iran.
The International Monetary Fund (IMF) has also weighed in, warning that a potential crash in AI share prices could threaten global financial stability. The IMF stated, “The consequences of an AI correction could be global,” highlighting that Asian markets would be particularly vulnerable, while the UK and eurozone might be more insulated.
In China, the Shanghai Shenzhen CSI 300 index fell by as much as 2.4%, marking its lowest level since August 2025. Taiwan’s TSMC, a leading chip maker and Asia’s most valuable company, saw a 2% decline despite reporting its sixth consecutive quarter of profits. European markets were not spared either, with Germany’s DAX down 0.36% and Italy’s FTSE MIB dropping by 1.3%.
This unfolding situation underscores the interconnectedness of global markets and the potential ripple effects of economic shifts, particularly in the tech sector. As investors navigate these turbulent waters, the focus will remain on inflation trends and central bank responses, which could shape market dynamics in the coming weeks.
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