Technology shares fall in the US and South Korea as AI spending fears persist

Technology shares carried Wall Street’s losses into South Korea on November 3, after the Nasdaq closed Monday down 1.1%. A steep fall in oil prices failed to halt the retreat. AFP attributed the selling to investors’ growing concern that enormous AI infrastructure bills will not produce adequate returns.

SK hynix and Samsung each fell around 4% during Tuesday trading, dragging South Korea’s Kospi lower. At about 02:30 GMT, the index was down 2.5%. Those readings were an early-session snapshot, not closing results.

The weakness extended to Taipei, Shanghai, Sydney, Singapore and Wellington. It was not a uniform regional decline: Hong Kong, Manila and Jakarta edged higher, while Tokyo was closed for a holiday. Wall Street also showed a split, with the Dow closing up 0.4% despite the Nasdaq’s loss.

The spending continues; patience wears thin

The concern centers on the gap between spending commitments and their eventual payoff. Amazon, Alphabet, Meta and Microsoft indicated in earnings reports that they would keep investing hundreds of billions of dollars in data centers and chips, according to AFP. Investors have become more impatient for returns as those commitments continue.

Financing adds another pressure point. Borrowing costs have risen sharply, and AFP reported concern about the financial position of some heavily indebted companies. The investment plans therefore face scrutiny on two fronts: whether the infrastructure earns enough, and how costly it becomes to finance.

Instead, the Nasdaq handed back the entire opening bounce and broke Friday's lows, a fairly ugly sign that the selling is now being driven by something deeper than oil, yields or the dollar.

Stephen Innes, SPI Asset Management, quoted by AFP

Cheaper oil offers little relief

Oil prices plunged more than 7% on Monday, a move that would normally offer support to technology shares, in Innes’s assessment. He argued that cheaper energy reduces inflation pressure and eases concerns about interest rates, helping stocks whose value depends heavily on earnings expected further into the future.

Crude extended its decline in early Asian trading. At about 02:30 GMT, West Texas Intermediate was down another 0.2% at $96.27 a barrel, while Brent fell 0.3% to $104.45. That further easing in energy prices coincided with continued losses in South Korean technology shares rather than a recovery.