"The answer is to run": Asian stocks collapse on fears of overvalued AI race leaders

Shares of companies on Asian markets collapsed on November 5, and trading volatility jumped to levels not seen since April. This happened after the sell-off in the technology sector on Wall Street, which made investors in high-growth stocks once again pay attention to the risks that their value may be overvalued.

MSCI's broadest index of Asia-Pacific shares (excluding Japan) fell 2.3% in trading. This was the biggest drop since U.S. President Donald Trump announced the "Emancipation Day" duties in early April, Reuters reports.

The Japanese and South Korean markets were particularly hard hit in Asia. At the beginning of trading, the index of the Tokyo Stock Exchange Nikkei 225 collapsed by 4.5%, retreating almost 7% from the all-time high reached a day earlier. According to Bloomberg, the collapse was the sharpest in six months. Shares of SoftBank, one of the participants in the $500 billion project to build data centers for OpenAI in the U.S., were down 14% in trading, the steepest drop since August 2024. In addition, securities of Advantest and Disco, manufacturers of equipment for chip production, as well as Furukawa Electric, a supplier of materials for electronics, fell sharply.

South Korea's Kospi stock index - one of the world's fastest-growing in 2025 - fell 6%. When futures on the Kospi 200 fell more than 5%, the Korean Exchange had to temporarily suspend the execution of orders for the sale of securities in the framework of program trading (using trading robots), reports Bloomberg. The outsiders were shares of AI memory chip makers Samsung Electronics and SK Hynix, which gave the Kospi a 20 percent jump in October.

Futures on the S&P 500 slipped 0.2% and the Nasdaq 100 slipped 0.4% after U.S. stocks fell amid warnings from executives at Wall Street's biggest banks to brace for a 10-20% market decline.

"The pullback is overdue after strong and sustained growth in the technology sector," said Charu Chanana, investment strategist at Saxo Markets. "A strengthening dollar, weakening cryptocurrency markets and concerns over valuations of US bigtechs have all combined to hit risk appetite," she said.

"There are few reasons to buy right now, and until we get closer to Nvidia's Nov. 19 earnings report, the market won't have a near-term catalyst," wrote Pepperstone Group analyst Chris Weston.

"At some point, profits have to be locked in. Especially when we've repeatedly seen solid gains to record highs," Reuters quotes StoneX analyst Matt Simpson as saying. - Those whose money is on the line are hardly looking for answers right now - they're just cheating off each other like kids on an exam. And the answer is to run."

However, Sean Oh, a trader at South Korea's NH Investment & Securities, said that although clients initially flooded him with inquiries about possible market weakness, investors in Seoul later calmed down a bit. "There is no panic, but there is some selling of AI-related stocks and [stocks] that have shown outperformance," he stated.

This article was AI-translated and verified by a human editor