Asian stocks fell sharply on Thursday as investors looked past a strong Wall Street session and focused on expensive artificial-intelligence investment, elevated borrowing costs and renewed pressure from oil above US$110 a barrel. Japan and South Korea led the regional decline, while Hong Kong, mainland China and Taiwan also traded lower.
Tokyo's Nikkei 225 dropped 1.6% to 63,595.58. South Korea's Kospi lost 2.6% to 5,586.89, Hong Kong's Hang Seng fell 2.7% and the Shanghai Composite declined 0.9%. The broad retreat shows that upbeat US corporate earnings were not enough to offset concerns about technology valuations and the inflation risk created by expensive energy.
Nikkei and Kospi lead the Asian sell-off
Technology stocks carried much of the selling pressure. SoftBank Group fell 5.6%, Tokyo Electron lost 5.9% and Advantest declined 5%, according to Associated Press market coverage. In Seoul, Samsung Electronics dropped 3.9% and SK Hynix fell 4.7%, pulling the Kospi lower.
The moves reversed part of the optimism created by strong US earnings. The S&P 500 had gained 0.6% on Wednesday, while the Dow Jones Industrial Average rose 0.7% and the Nasdaq Composite climbed 1.1%. SpaceX, Tesla and other companies helped lift Wall Street, but US equity futures turned lower during Asian trading.
The selling was broad. Taiwan's Taiex fell 0.8%, while Australia's S&P/ASX 200 declined 0.3%. Reuters reported that the MSCI Asia-Pacific index excluding Japan slipped 0.2% in early trading and remained on course for a fourth consecutive weekly decline.
AI financing costs test technology valuations
Investors are questioning whether the earnings generated by artificial intelligence can keep pace with the cost of building data centres, buying chips and financing infrastructure. That concern matters more when interest rates are high. The US 10-year Treasury yield rose to 5.12%, increasing the discount rate applied to future corporate profits and making richly valued growth shares more vulnerable.
Recent results still show strong demand. BullBuzz reported that Meta's quarterly revenue rose 26% as Muse passed 10 million accounts. Yet Meta also guided to US$135 billion-US$145 billion in 2026 capital expenditure, underlining the scale of the industry's spending.
The mixed earnings picture added to caution. Tesla's quarterly profit fell 43% despite stronger free cash flow, while SpaceX reported a US$4.4 billion profit. Strong individual results therefore supported US shares without settling the wider debate over AI returns, leverage and capital intensity.
Brent above US$110 adds inflation pressure
Energy prices created a second source of risk. Brent crude rose 1.6% to US$110.55 a barrel, while US benchmark crude gained 1.3% to US$98.45. Oil has traded between roughly US$97 and US$112 in recent sessions as markets assess the conflict with Iran and uncertainty around global energy flows.
Oil above US$110 can raise transport, manufacturing and electricity costs across Asia, where major economies depend heavily on imported energy. The effect can slow disinflation, reduce room for interest-rate cuts and pressure corporate margins. Those channels help explain why technology earnings and oil prices are moving regional equities at the same time.
Investors can compare the latest index moves with official benchmark information from Nikkei Indexes, Korea Exchange and Hong Kong Exchanges and Clearing.
What markets are watching next
The next test is whether Asian chip and internet shares stabilise after the initial earnings reaction. Traders will also watch US futures, Treasury yields and oil for confirmation that Thursday's decline is a short-term pullback rather than a broader change in risk appetite.
For regional investors, the key combination is straightforward: earnings must remain strong enough to justify heavy AI spending, while energy and funding costs must stop rising. Until that balance improves, sharp rotations between technology optimism and inflation concern are likely to keep Asian markets volatile.