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Investing.com-- Asian technology stocks fell sharply on Wednesday, tracking overnight declines in their Wall Street peers as emerging doubts over the artificial intelligence trade saw investors lock-in recent profits in the sector.
Tech was also spooked by speculation over the U.S. government taking equity stakes in major chipmaking and AI firms, after the commerce department confirmed it was taking a stake in Intel Corporation (NASDAQ:INTC) over its CHIPS Act funding.
Reuters reported that Washington could seek equity in other tech companies that received funding under the Biden-era act. The NASDAQ Composite slid over 1.5% on Tuesday.
SoftBank Group Corp. (TYO:9984) was among the worst performers in Asia, with the Japanese tech conglomerate tumbling over 9%. Nvidia supplier Advantest Corp. (TYO:6857) sank 6%, while chipmakers Tokyo Electron Ltd. (TYO:8035) and Renesas Electronics Corp (TYO:6723) shed 1.8% and 3.2%, respectively.
In Hong Kong, the heavyweight trio of Baidu (NASDAQ:BIDU) Inc (HK:9888), Alibaba (HK:9988), and Tencent Holdings Ltd (HK:0700) fell between 0.8% and 2%. Xiaomi (OTC:XIACF) Corp (HK:1810) was an outlier, logging limited losses after it clocked strong second-quarter earnings on Tuesday.
Semiconductor Manufacturing International Corp (HK:0981), China’s biggest chipmaker, fell slightly, given its limited exposure to international AI markets.
South Korean memory chip giant SK Hynix Inc (KS:000660) fell more than 3%, tracking a similar overnight decline in top customer NVIDIA Corporation (NASDAQ:NVDA), while rival Samsung Electronics Co Ltd (KS:005930) was flat.
Top Nvidia supplier TSMC (TW:2330) slid nearly 4% in Taiwan trade.
Recent losses in tech stocks came following a critical report from a branch of the Massachusetts Institute of Technology released earlier this week. The report said that 95% of organizations were getting “zero return” from their investments in generative AI, hype over which has been a key driver of Wall Street’s recent gains.
The report claimed that only 5% of AI pilots from major corporates were generating value, while a vast majority of AI ventures remained stuck “with no measurable impact.”
OpenAI CEO Sam Altman also recently warned that an AI bubble may be forming, further spooking tech shares.
Doubts over the AI trade come just a week before earnings from AI darling Nvidia, which is expected to log another quarter of outsized results. Nvidia’s shares fell about 3.5% overnight.
Tech stocks were sitting on a strong run-up through late-July and early-August, which also left them vulnerable to profit-taking as market sentiment soured.
Beyond doubts over the AI trade and government control, tech was also pressured by increased uncertainty over U.S. interest rates, as markets awaited comments on monetary policy from Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium on Friday.