Asian stocks rebound after brutal chip selloff

A brutal selloff in Asian semiconductor stocks on Tuesday, July 28, pulled the MSCI Emerging Markets Index to its lowest level since April, as investors reassessed the sustainability of the AI investment boom ahead of a critical week of tech earnings and a Federal Reserve policy decision.

Carnage Across Asian Chipmakers

The rout was led by South Korea's Samsung Electronics, which plunged more than 12%, while Japan's Kioxia fell 18% and Taiwan's TSMC ↘ 1.20% slid 3%, according to France24. SoftBank Group, a major AI investment proxy through its stake in Arm ↘ 0.19%, dropped more than 4%, CNBC reported. South Korea's Kospi dove more than 10% to a three-month low, Reuters reported.france24+2

The selloff spread into U.S. markets, briefly pushing the Nasdaq-100 into correction territory on Tuesday as Nvidia ↘ 1.47%, Micron ↘ 2.22%, and Applied Materials ↗ 0.41% all fell in premarket trading. However, the S&P 500 ended the session higher as gains in blue-chip names like Boeing ↗ 1.12% and Coca-Cola The Coca-Cola Company ↘ 0.59% offset chip losses.newsradio1410.iheart+2

Questions Over AI Spending Returns

The downturn reflected growing investor skepticism about returns on the massive capital expenditures being poured into AI infrastructure. The MSCI World Semiconductor Index fell roughly 13% during July, its worst monthly performance since 2022. Investors were particularly cautious ahead of earnings reports from Microsoft ↗ 0.52% and Meta ↗ 1.02%, which are expected to shed light on the trajectory of AI spending.leverageshares

BNP Paribas Asset Management argued the selloff was "more technical than fundamentally driven," noting that the MSCI EM Asia Information Technology Index had advanced nearly 120% since the start of 2026 before the recent 15.6% pullback, suggesting profit-taking and leveraged unwinds rather than a deterioration in AI demand.bnpparibas-am+1

Markets Stabilize Wednesday

Asian stocks rebounded on Wednesday as the initial panic subsided. Reuters reported that markets stabilized ahead of the crucial tech earnings and the Fed decision later in the week. The divergence between the Dow Jones Industrial Average, which hit a new record on Tuesday, and the tech-heavy Nasdaq underscored a rotation away from richly valued AI plays toward traditional blue-chip stocks.wtvbam+1