AI skepticism and rate fears trigger Asian market sell-off as South Korea's Kospi drops nearly 9%

Asian markets fell sharply on Monday as interest rate fears and doubts about the durability of the AI-driven stock rally triggered a broad sell-off, with technology and semiconductor shares taking the biggest hit. South Korea’s Kospi index dropped by nearly 9%, according to Asharq Al-Awsat, severe enough to trigger automatic trading suspension mechanisms.

The decline came after a rough stretch for global markets in which investors have begun to question whether valuations for some of the market’s biggest AI beneficiaries have run too far ahead of earnings and profits. As reported by Slashdot, US tech stocks had already sold off after warnings that the enthusiasm around artificial intelligence could be overdone, with Nvidia, Palantir and Arm among the notable losers.

The pressure spread into Asian trading, where record-high semiconductor stocks were among the hardest hit, according to Asharq Al-Awsat. The report said the sell-off continued the weakness that began the previous week, underscoring how tightly the region’s market performance has become linked to the global chip and AI trade.

South Korea was especially exposed because of its heavy weighting in technology and chipmakers. The Kospi’s near-9% fall reflected not only broad market anxiety but also the scale of investor concentration in a small number of large technology names, which can magnify losses when sentiment turns.

The broader concern is that higher borrowing costs could make it harder for investors to justify the rich valuations that have powered the AI boom. In the US, traders were also reacting to a report cited by Slashdot from a Massachusetts Institute of Technology branch that said most organisations were getting no return from their generative AI investments, adding to skepticism about near-term profits from the technology.

For investors, the move matters because it suggests the AI rally may be entering a more volatile phase, with gains increasingly vulnerable to shifts in interest-rate expectations and earnings realism. What happens next will depend on whether markets see signs that inflation and rates are easing, or whether selling pressure continues to spread across tech-heavy indexes in Asia, the US and Europe.