A woman uses her mobile phone as she walks past the logo of Japan’s telecommunications giant SoftBank in Tokyo on December 25, 2013.
Toru Yamanaka | Afp | Getty Images
Shares of Asian AI-linked companies and tech firms fell Wednesday, tracking declines in U.S. peers, as investors turned wary of stretched valuations in the market’s most crowded trades, with Japan’s SoftBank plunging 13%.
SoftBank has built a broad portfolio of AI-related investments spanning infrastructure, chips, and applications.
It has a controlling stake in U.K-based Arm Holdings, whose chip designs power mobile and AI processors, and acquired Ampere Computing this year to strengthen its AI data-center capabilities. Nasdaq-listed Arm Holdings saw shares drop 4.71% overnight.
Other Japanese tech stocks also fell: semiconductor testing equipment maker Advantest declined over 8%, chipmaker Renesas Electronics lost 5.48%, Tokyo Electron, a chip production equipment maker, fell more than 5%.
South Korean memory chip giants Samsung Electronics and SK Hynix lost nearly 6%. The surge in chipmakers SK Hynix and Samsung Electronics this year has helped push South Korea’s Kospi Index to record highs.
Taiwan’s TSMC, the world’s largest contract chipmaker, fell 2%. Alibaba declined over 3% while Tencent was more than 2% lower.
The declines come after U.S. software company Palantir dropped about 8% overnight, even after topping expectations for the third quarter, as sky-high valuations across AI sector hit investor sentiment. The AI-led rally has pushed the S&P 500’s forward P/E above 23 — its highest since 2000, according to FactSet.
The frenzy around AI has sparked concerns that markets could be in the midst of a tech bubble.
“There is fear of an AI correction, and if it comes, it will sweep the rest of the market with it due to the heavy weight of the leading names,” market veteran Louis Navellier wrote in a note.
Some analysts say valuations of AI companies increasingly resemble the dot-com boom of the late 1990s, with share prices soaring far ahead of credible profit expectations.
Jared Bernstein, who headed the Council of Economic Advisers during the Joe Biden administration, noted that the share of the economy devoted to AI investment is almost a third higher than during the internet bubble, adding that the gap between earnings potential and spending “certainly looks bubbly.”
Michael Burry, famed for predicting the 2008 financial crisis, has also stirred controversy with his bet against AI darlings Palantir and Nvidia. In a recent filing, Burry’s Scion Asset Management revealed significant short positions on these firms, which are at the forefront of AI and chip technology.
Besides Palantir, other U.S. tech majors also fell overnight: Oracle lost 4%, Chipmaker AMD dropped nearly 4%, while Nvidia and Amazon also declined.
