Asian markets sell off on oil surge, AI spending fears

Stock markets across Asia sold off sharply on Friday, July 24, as surging oil prices and renewed anxiety over the returns on massive artificial intelligence spending triggered a broad retreat from risk assets, extending a steep overnight decline on Wall Street.

Tech Stocks Bear the Brunt

Japan's Nikkei 225 fell more than 2%, dragged lower by heavyweight semiconductor and AI-linked stocks. SoftBank Group dropped over 5%, while memory chipmaker Kioxia slid nearly 4%. South Korea's Kospi declined more than 3%, with Samsung Electronics losing over 3% and SK Hynix falling nearly 4%.

The selling followed a punishing session on Wall Street, where the S&P 500 dropped 0.9% and the Nasdaq Composite sank 1.9% on Wednesday. The catalyst was Alphabet's ↘ 3.58% second-quarter earnings report, which showed the Google parent raising its 2026 capital expenditure outlook to as much as $205 billion, reigniting doubts about whether the AI investment boom can generate adequate returns. According to Reuters, Alphabet burned $5.9 billion in free cash flow during the quarter even as its cloud unit posted record 82% growth.reuters+2

Tesla ↗ 0.32% added to the pressure after CEO Elon Musk called 2026 a "massive capex year" focused on robots, robotaxis, and data centers.finance.yahoo

Oil Approaches $100 as Middle East Conflict Widens

Brent crude surged toward $100 a barrel on Thursday, its highest level since May, as the U.S.-Iran conflict showed no signs of de-escalation. CNBC reported that Brent topped $100 during the session after Iran-backed Houthi forces claimed attacks on tankers in the Red Sea. Earlier in the week, President Donald Trump threatened to bomb Iranian infrastructure in response to any attacks on ships transiting the Strait of Hormuz.cnbc+2

The oil rally has pushed bond yields higher, with the 10-year Treasury reaching its highest level in roughly 18 months, undercutting expectations that the Federal Reserve might hold off on further rate increases.finance.yahoo

A Market Under Prolonged Stress

The selloff adds to what has been a brutal stretch for Asian technology stocks. South Korea's Kospi has fallen approximately 23% in July alone, its worst monthly performance on record, as investors reassess whether elevated semiconductor valuations can be justified by future AI profits. The Philadelphia SE Semiconductor index in the United States hit a near two-month low last week as the chip selloff broadened.reuters+1

For investors, the combination of triple-digit oil prices stoking inflation fears and the world's largest technology companies signaling ever-larger spending commitments with uncertain payoffs has created what one HSBC note described as an outlook that "now hinges on whether diplomacy can restore predictable shipping flows".cnbc