Asian markets fell broadly on Thursday (Dec 18), extending losses from Wall Street, as fresh worries over the technology sector’s massive spending on artificial intelligence weighed heavily on investor confidence and overshadowed hopes for a year-end rally.
The cautious mood followed another sharp sell-off in US equities, where technology stocks bore the brunt of mounting concerns that valuations have surged too far, too fast, without clear evidence of near-term returns. Those anxieties have been compounded by uncertainty over US monetary policy after the Federal Reserve last week signalled it could pause interest rate cuts as early as next month.
While the Fed’s three consecutive rate reductions in recent months had helped fuel a strong rebound in equities toward the end of the year, investors are now questioning how long that support will last. The prospect of a pause has prompted fears that financial conditions may tighten again just as markets enter a seasonally volatile period.
Attention is now firmly on key US inflation data due later on Thursday, which could provide fresh insight into the central bank’s next steps. However, optimism has been tempered after a closely watched jobs report earlier this week offered little clarity on the direction of the economy or future policy moves.
At the centre of the current market unease is the technology sector, particularly companies at the forefront of the artificial intelligence boom. Software developers, semiconductor makers and firms building the infrastructure to support AI have driven global markets to record highs this year. But a growing number of investors are now questioning whether expectations have run ahead of reality.
Speculation that an AI-driven bubble may be forming has intensified in recent weeks, with traders asking when the enormous sums being poured into data centres, chips and computing power will translate into sustainable profits. Those concerns deepened on Wednesday after reports that private capital group Blue Owl had withdrawn from a planned US$10 billion data centre project led by Oracle, casting doubt over the venture’s future.
The news came on the heels of disappointing earnings reports from Oracle and chip giant Broadcom last week, which failed to meet lofty market expectations. Oracle shares plunged more than five per cent on Wednesday, while Broadcom also slid. Other heavyweight technology names, including Nvidia, Alphabet and Advanced Micro Devices, were dragged lower as selling spread across the sector.
The tech-heavy Nasdaq index fell 1.8 per cent, while the broader S&P 500 lost more than one per cent, marking another bruising session for US stocks. Michael Hewson, chief market analyst at CMC Markets, said the sharp rise in valuations had “prompted fears of a bubble in the sector, with some wild swings in recent weeks on the back of end-of-year profit taking”.
He added that there was increasing talk among investors that 2026 could bring “a bit of a reset when it comes to AI winners and AI losers”, as markets begin to differentiate between firms that can deliver long-term returns and those that may struggle to justify their spending.
Asian markets mirrored the US downturn on Thursday, led by losses in technology-related shares. Tokyo fell more than one per cent, dragged down by chipmaker Renesas and investment conglomerate SoftBank, both seen as closely tied to the global tech cycle. Seoul also dropped more than one per cent, while Hong Kong, Sydney, Singapore, Wellington, Taipei, Manila and Jakarta all closed in negative territory. Shanghai was broadly flat.
Oil prices climbed more than one per cent for a second straight day. Gains followed a statement from Washington that US forces had carried out a strike on a vessel in the Pacific Ocean allegedly involved in drug trafficking, killing four people described as “narco-terrorists”.
Oil markets were also unsettled by renewed concerns over US President Donald Trump’s stance on Venezuela after he ordered a blockade of “sanctioned” oil tankers entering and leaving the country. Venezuelan President Nicolas Maduro accused the White House of pursuing regime change under the guise of anti-drug operations, adding another layer of geopolitical tension to already jittery global markets.
