Asian stocks rebound after CPI, AI fears spark tech rout

A hotter-than-expected US inflation report and growing doubts about how the artificial intelligence boom is being financed set off a global selloff in technology stocks this week. Shares fell from New York to Seoul and then into London and the rest of Europe. Deutsche Bank analysts said the developments pushed the S&P 500 down 1.11% on Wednesday, October 14, its worst performance since July.fxstreet.com

The consumer price index rose 3.7% from a year earlier in September, above the 3.6% forecast. Core inflation reached 2.6%, according to CNBC. Capital Economics said the result brought an October Fed rate hike back into play.economictimes.indiatimes.com+1

AI financing under strain

Deutsche Bank said investors were already uneasy about AI-exposed companies. Credit default swaps on CoreWeave ↗ 5.56%, a measure of what investors pay to insure against default, rose to 1,118 basis points, and its shares fell 15.46% on October 14. Oracle ↗ 3.18% had its largest drop since June. The Philadelphia Semiconductor Index PHLX Semiconductor Index ↗ 7.03% fell for a sixth straight session, the first such streak in more than a year, and is down 11.6% over that stretch. JPMorgan ↗ 2.27% analysts wrote that the CPI report started the slide but "tech was the main driver."reuters.com+1

On Thursday, October 15, South Korea's Kospi fell 7.6% and Japan's Nikkei 225 fell 4.9%, as Samsung Electronics and SK Hynix ↗ 5.53% dropped sharply. The Kospi's slide triggered a circuit breaker, which pauses trading after large declines.fxstreet.com+1

Contagion spreads, but limited

The selloff reached London. Polar Capital Technology Trust fell 5% in early trading on Thursday. The Stoxx 600 slipped in the morning, led by tech shares, while strong earnings from Ericsson Telefonaktiebolaget LM Ericsson ↗ 3.31% limited the losses. CNN reported that ASML ↗ 6.21% fell nearly 5%, and pointed to Chinese memory-chip competition as another worry.economictimes.indiatimes.com+2

Henry Allen, a macro strategist at Deutsche Bank, called the limited spread a good sign. "The fact that we haven't seen that spread to Europe, for instance, we haven't seen that contagion… I think is a promising sign," he told Bloomberg Television.bloomberg.com

Markets steady, nerves remain

Wall Street steadied on Thursday as investors moved out of tech. The Dow Jones Industrial Average gained 550 points, and CoreWeave reversed early losses to close up 6%, Investopedia reported. Asian stocks rebounded on Friday. The Kospi rose 3.3% and the Nikkei 1.9%, according to Reuters.investopedia.com+1

Even after the bounce, the Kospi was heading for its biggest weekly loss since October 2008. Jefferies economist Mohit Kumar warned that "a slowdown in the AI infrastructure build out would imply a sharp slowdown in US growth expectations."finance.yahoo.com+1