Asian stocks drop as chip selloff hits Nikkei, TSMC shares

Asian stocks fell as chipmakers led a regional retreat, with oil near $85 a barrel adding inflation pressure to a fragile tech tape.

Market data showed the MSCI Asia Pacific equities gauge down 2.1%, while Japan’s Nikkei 225 Stock Average lost 4.4%. Futures tied to the Nasdaq 100 Index slipped almost 1%, pointing to more pressure on large technology shares in the U.S. session.

The weakness was not confined to semiconductors. Netflix Inc. fell 9% in extended trading after projecting another quarter in which sales growth would slow, adding to concern that expensive growth stocks have little room for disappointment.

Chip valuations meet spending doubts

Taiwan Semiconductor Manufacturing Co. dropped more than 4% after an encouraging earnings outlook failed to offset investor concern over a larger spending plan. The reaction showed how the market is shifting from rewarding exposure to artificial intelligence demand to asking how much capital will be needed to serve it.

Kioxia Holdings Corp. suffered the sharpest reported move in the group, tumbling 15% in Tokyo. The memory-chip company’s market value has been cut by half over one month, a reversal that captures how quickly sentiment can turn when investors question the durability of an AI-linked rally.

The immediate issue is capital expenditure. Chipmakers and suppliers have been valued on expectations that AI servers, data centers and advanced memory demand will keep expanding, but higher investment plans can weigh on free cash flow before the resulting revenue appears.

Oil near $85 complicates rates

Brent crude recovered from a Thursday decline and traded slightly under $85 for each barrel. It was up 12% for the week, putting the contract on course for its strongest weekly advance since April.

The oil move added a separate risk for equity investors already reassessing technology valuations. Fighting in the Middle East and reduced shipping traffic through the Strait of Hormuz have raised concern that energy costs could feed into transport, production and consumer prices.

Softer U.S. inflation readings had reduced expectations of an immediate Federal Reserve rate increase, according to the market narrative described in the source material. A sustained energy shock would complicate that relief because fuel prices can pass through the economy faster than many other costs.

Earnings season tests AI trade

Fabien Yip, a market analyst at IG International, said investor attention has returned to balance sheets as AI spending rises. “Capex guidance comes into focus again as investors get increasingly skeptical on whether growth can be achieved sustainably while maintaining a healthy balance sheet,” he said. “We expect the market to continue to experience volatility during the earning season, but this is unlikely to be an end to the AI story.”

If major chip companies show that higher spending is converting into stronger orders and margins, the global macro effect would be a firmer investment cycle rather than a pure valuation bubble. For TSMC, that path would support its role as the key manufacturing supplier for advanced processors, while the wider semiconductor sector could regain confidence in AI-related capital plans.

If spending rises faster than revenue, the market pressure would work through a different channel. Global investors would likely demand higher risk premiums for long-duration growth stocks, TSMC could face more scrutiny over the timing of returns on new capacity, and chip suppliers would have to defend valuations with clearer evidence of customer demand.

If Brent stays close to $85 or climbs further because shipping remains disrupted, the macro channel shifts toward inflation and interest-rate risk. That would matter for TSMC through energy, logistics and valuation costs, while the broader technology sector would face a tougher earnings season as higher discount rates reduce the value investors place on future profits.

The next test is whether earnings reports can separate durable AI demand from spending that may be running ahead of revenue. Investors will also track shipping flows near the Strait of Hormuz, the direction of Brent prices and whether Nasdaq futures weakness turns into a broader U.S. equity selloff.