Tech firms spearheaded a plunge across Asian markets Wednesday after a rout on Wall Street fuelled by an unprecedented collapse in chip titan Nvidia and disappointing data on U.S. factory activity that revived recession fears in the world's largest economy.
The sight of investors running to the hills revived memories of the recent brief – but tumultuous sell-off at the start of August – which was partly fuelled by a big miss on U.S. jobs creation.
All three leading indexes in New York ended sharply lower Tuesday, with the Nasdaq the main casualty – diving more than 3% – as traders dumped big-name tech firms, including Apple, Alphabet and Amazon.
But the biggest loser was AI chip leader Nvidia, which tanked 9.5%, shedding nearly $280 billion of its value on fears that the surge in firms linked to artificial intelligence may have run too far.
That came amid a warning that spending on all things AI by companies in recent years would need to be justified unless demand outside of the tech realm picked up and that it could take some time to begin paying off.
Adding to the pain, it emerged after U.S. markets closed that U.S. authorities had issued Nvidia and other firms subpoenas as it probes claims they violated antitrust laws.
The selling filtered through to Asia, where tech and chip firms took the brunt of it.
Japan's Advantest plunged 8.2% and Tokyo Electron more than 7%, while Sony lost 2.3%.
Taiwan Semiconductor Manufacturing Company (TSMC) shed more than 4% in Taipei, with SK Hynix dumping 6.5% in Seoul and Samsung more than 2% off.
That led Asian markets deep into the red.
Tokyo and Taipei each dove more than 3%, while Seoul was more than 2% lower. Hong Kong, Sydney, Singapore and Manila gave back more than 1%.
Shanghai and Wellington were also down.
Worries about the U.S. economy resurfaced after figures showed a marginal improvement in factory activity in August. However, the index remained in contraction for a fifth successive month.
The figures come days before a closely watched report on nonfarm payrolls, which could have a big impact on U.S. Federal Reserve (Fed) officials' decision-making going into next week's policy meeting.
The bank is expected to cut interest rates, but the debate surrounds how big it will go, with most tipping a 25-basis-point reduction. However, a below-forecast reading boosts the chances of a 50-point move.
While weaker readings on jobs and the economy have been seen as positive in recent times owing to the chances of the Fed cutting rates, analysts warned that the bad news was now being taken as a worrying sign for the economy.
"A 50-basis-point cut might not be the market's best friend if it shows up alongside signs of labor market weakness," said independent analyst Stephen Innes.
"In that scenario, those cuts could be viewed less as a soft landing cushion and more as a last-ditch effort to steer clear of a full-blown economic crash."
The chances of a bigger Fed rate cut pushed the dollar down against the yen, which had already been given a boost Tuesday by comments from the Bank of Japan (BOJ) boss Kazuo Ueda, who said it could hike rates again if the country's economy and inflation perform as expected.
Oil extended losses after the previous day's heavy selling sparked by demand worries linked to a weak Chinese economy and questions over the U.S. outlook, while the Organization of the Petroleum Exporting Countries (OPEC) consideration of output hikes added to the pain.