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Asian stocks got slammed this week as investors finally cooled off from the AI frenzy and scrambled to figure out what the hell central banks are planning.
The rally that started the year didn’t last long, so traders who chased tech gains across Asia are now watching the floor fall out from under them.
According to Bloomberg, last year’s market darling, the MSCI Asia Index, beat every major global benchmark by nearly five full points. That win streak just met a brick wall. Asia’s heavy reliance on the global AI supply chain means anything that hits Wall Street’s chip names hits Asia right after. And right now, nobody knows if the AI trade is just taking a break, or running out of gas for good.
China ramps up local chip funding as Korea and Taiwan face heat in the Tech Wars
AI stocks pushed Asia’s tech index to a record high last Friday. Now, investors are backing off. Everyone wanted a piece of the action last year. This year, they’re nervous.
The problem is most of that rally sat on the backs of just a few firms, especially in Taiwan and South Korea.
Some are still hopeful that Asia gives them better exposure to AI because of lower prices. But others are warning that too much depends on too few players.
Ken Wong, who runs Asian equity portfolios at Eastspring in Hong Kong, said, “We’re calling more of an AI fatigue as opposed to a bubble.” He said if companies cut back spending or if profits start slipping, it’s game over for some of these stocks.
While all that’s happening, China is going the other way by working on a massive $70 billion package to support the country’s chipmakers.
Two big names (MetaX Integrated Circuits Shanghai and Moore Threads Technology) just had blockbuster public listings. That kicked off a rush. Now, everyone wants in. Baidu’s AI chip division and GigaDevice Semiconductor are both planning new offerings.
Why is money pouring in? Because it’s cheap. Tech stocks listed in Hong Kong are trading at 19 times forward earnings. The Nasdaq 100 is sitting at 25. That’s enough of a gap to grab attention.
Rate confusion spreads while investors rotate into weaker markets
The Federal Reserve is expected to cut interest rates twice this year. That puts pressure on central banks from India to Thailand to follow suit. The idea is to help economies grow faster. But not everyone’s on board.
The Bank of Japan is under fire to raise rates again. The yen is too weak, and inflation’s too hot. New Zealand’s central bank says it’s done cutting for now. Australia is getting ready to hike again. This back-and-forth is leaving traders stuck in guessing mode.
Dilin Wu at Pepperstone said India’s low-rate strategy could help its stock market. He also said Thailand, Malaysia, and even China could benefit if their central banks go easier. But companies loaded with debt? They’re in trouble.
The crowd chasing AI stocks last year is now digging through the trash pile for anything with upside. India’s Nifty 50 only rose 10.5% in 2025. That was its worst showing against the MSCI Asia Pacific Index since 1998. Now it’s cheap. Lower taxes and possible rate cuts might flip the story.
Indonesia is getting some attention too. Its government is still trying to boost spending, and that could help. Southeast Asia fell behind last year. Traders think it might finally catch up.
Xin-Yao Ng, who manages money at Aberdeen, said, “India and ASEAN are interesting for being very non-AI.” He’s watching for companies with good cash flow, low drama, and fat dividends.
Then there’s South Korea, which absolutely crushed last year when its stocks outstandingly rallied 76% year-to-date, thanks to AI euphoria and hype around market reforms. Just this Friday, Cryptopolitan reported that Korea’s Kospi index added another 2.3%, blasting past 4,300. President Lee Jae Myung wants it to hit 5,000.
Samsung is flying. It hit another all-time high after co-CEO said customers were saying, “Samsung is back.” That buzz got louder when data showed semiconductor exports from Korea jumped 43% in December. Between Samsung and SK Hynix, Asia’s still got power players in the global AI race.
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