Global tech stocks tumble as US inflation data fuels rate hike fears

A sharp sell-off in artificial intelligence and semiconductor shares has gripped global markets, driven by renewed concerns over rising inflation and the potential for further interest rate increases. The downturn has particularly affected heavily indebted technology sectors, spooking traders who were already wary of the financial exposure within the AI industry. This accelerating decline marks a significant shift in sentiment, with investors retreating from high-growth tech assets in favour of safer havens as economic uncertainty mounts.

The impact was most severe in Asian markets, where South Korea’s benchmark Kospi 200 index fell by more than eight per cent overnight to reach a six-month closing low. The drop was sufficient to trigger circuit breakers that halted trading at various points during the session. Key semiconductor manufacturers suffered substantial losses, with SK Hynix plunging by nearly eleven per cent and Samsung Electronics dropping by 9.5 per cent. The index ultimately closed down 8.1 per cent, reflecting the broad-based weakness in the memory chip sector that dominates the Korean market.

Japan’s Nikkei 225 index also experienced a significant decline, dropping by 4.9 per cent on Thursday. This fall was largely attributed to an 11 per cent slump in the memory chip maker Kioxia and a ten per cent drop in SoftBank, a major investor in OpenAI, the developer of ChatGPT. The Asian losses followed a previous day of weakness on Wall Street, where the Nasdaq Composite fell by 1.9 per cent and the S&P 500 dropped 1.1 per cent, marking its worst performance since July. Trading in the United States continued to be volatile, with the Nasdaq dropping a further 1.4 per cent at the start of Thursday’s session. Companies such as Dell, which manufactures datacentre servers, and Coherent, which produces components for AI infrastructure, led the early declines.

The market turmoil was precipitated by US economic data released on Wednesday, which showed that domestic inflation had jumped to a higher-than-expected 3.7 per cent in September. This represented the fastest increase in prices since the consumer price index hit a three-year peak of 4.2 per cent in May. Additional data released on Thursday indicated that US producers had increased their prices by 6.3 per cent year on year in September, the sharpest rise since December 2022. These figures have intensified fears among investors who are now pricing in fresh interest rate increases by the US Federal Reserve, with some market participants expecting another hike as soon as the end of the month.

Analysts at Deutsche Bank noted that the market had experienced an incredibly tumultuous period, with the strong inflation print followed by mounting fears regarding the AI trade. They highlighted that the price increases were not solely driven by fuel costs, which have been affected by geopolitical tensions including the ripple effects from the US conflict with Iran. Instead, the data showed broad-based moves across the consumer basket. The International Monetary Fund has also warned that the threat of an AI share price crash rippling out across global markets is putting world financial stability at risk. The IMF stated that the consequences of an AI correction could be global, with Asian markets most exposed, while the UK and eurozone may be more insulated, although investors with US holdings would still face losses.

The latest jitters have also affected China, where the Shanghai Shenzhen CSI 300 index slipped by as much as 2.4 per cent, marking its lowest level since August 2025. In Taiwan, TSMC, one of the world’s leading chip makers and Asia’s most valuable company, fell by two per cent despite reporting its sixth consecutive quarter of profits. European stocks also came under pressure, with Germany’s DAX index down 0.36 per cent in afternoon trading and the Italian FTSE MIB dropping by 1.3 per cent.