Just days ago, as the biggest winners of the global artificial intelligence boom.
The two Asian markets had recently overtaken India in global stock market rankings, powered by a relentless rally in chipmakers and AI-linked companies. South Korea climbed past India to become the world’s sixth-largest stock market, while Taiwan moved ahead to claim the fifth spot.
Now, the same AI-driven rally that helped propel those markets higher is suddenly losing momentum.
Asian stocks plunged on Monday as investors rushed to exit some of the market’s most crowded AI bets, triggering sharp declines across Taiwan, South Korea and Japan and wiping billions of dollars off market values.
major market this year, fell as much as 9% during the session. The sell-off was severe enough to trigger circuit breakers that halted trading for 20 minutes.
Taiwan’s benchmark index fell as much as 6%, marking its worst day since March, while Japan’s Nikkei dropped nearly 4%.
The correction was led by the very stocks that had fuelled the rally.
Samsung Electronics and SK Hynix, South Korea’s two chip giants and major beneficiaries of AI spending, fell more than 10% each.
and one of the biggest beneficiaries of the AI boom, dropped 5.7%.
The sell-off came after US chipmaker Broadcom issued a disappointing outlook last week, raising concerns that investor expectations for AI-related earnings growth may have become too optimistic.
At the same time, a stronger-than-expected US jobs report increased expectations that the US Federal Reserve could raise interest rates again this year instead of cutting them.
Higher interest rates tend to hurt high-growth technology stocks because future earnings become less valuable when borrowing costs rise.
“The move looks more like a positioning and momentum unwind than a reassessment of the long-term AI story,” Marc Velan, head of investments at Lucerne Asset Management in Singapore, told Reuters.
The speed of the reversal has surprised investors.
South Korea’s KOSPI had been one of the hottest markets globally, driven largely by enthusiasm around , memory chips and semiconductor exports.
Even after Monday’s fall and a three-day decline of around 15%, the index is still up about 81% this year.
Taiwan had also enjoyed a powerful rally thanks to demand for AI chips and infrastructure, helping it overtake India in global market capitalisation rankings only weeks ago.
Those gains made both markets heavily dependent on continued optimism around AI spending.
When sentiment shifted, the selling was equally aggressive.
“The AI-drives-everything narrative frayed last week,” Bob Savage, head of markets macro strategy at BNY, told Reuters.
Investors are now debating whether the correction represents a healthy pause after a strong rally or the beginning of a deeper pullback in AI-linked stocks.
The technology sell-off was made worse by fresh tensions in the Middle East.
Brent crude oil prices jumped about 3.5% after Israel said it had struck military targets in Iran.
Higher oil prices typically increase inflation risks and make it harder for central banks to lower interest rates.
The combination of rising oil prices and expectations of tighter US monetary policy created a difficult backdrop for equity markets globally.
Nasdaq futures, European futures and broader Asian markets also came under pressure.
The sharp correction highlights how quickly market leadership can change.
Only days ago, Taiwan and South Korea were being cited as examples of how exposure to AI and semiconductors had helped them race past India in global stock market rankings.
India, which lacks large listed semiconductor champions comparable to TSMC, Samsung or SK Hynix, had struggled to benefit from the AI-driven market rally.
Now, the same concentration in AI-linked stocks that powered Taiwan and South Korea higher is amplifying the downside when investor sentiment turns.
That does not mean the long-term AI story is over.
Most analysts continue to believe demand for AI infrastructure, chips and data centres will remain strong.
But Monday’s sell-off serves as a reminder that markets rarely move in a straight line.
The rally that pushed Taiwan and South Korea past India was built on enormous expectations around artificial intelligence. Investors are now being forced to ask whether those expectations had run too far ahead of reality.