Asian shares fall as AI stock plunge and Iran war oil spike hit markets

Asian stock indices finished lower Friday after a sharp decline in artificial intelligence shares dragged global markets lower, marking the S&P 500's worst single day since July. The sell-off in tech stocks overwhelmed gains in other sectors, while oil prices climbed to their highest levels since May on concerns regarding the war with Iran.

In Asia, the Nikkei 225 in Tokyo dropped 1.7% to close at 61,825.26. South Korea's Kospi index fell 2.4% to 5,403.32, and the Shanghai Composite in China slipped 1.3% to 3,610.52. The S&P/ASX 200 in Australia shed 0.2% to end at 8,777.00. In contrast, the Hang Seng index in Hong Kong gained 0.2% to finish at 22,983.80.

The pressure on AI stocks stems from investor anxiety over the high cost of borrowing for data center construction and chip purchases. Despite continued corporate growth reports, many view valuations as inflated from a yearslong rally. Meta Platforms lost 7% after its quarterly revenue beat analyst expectations but profit fell short; the company also announced plans to issue a new class of stock to fund AI investments. Tesla declined 3.1% despite a stronger-than-expected summer profit, as revenue missed forecasts.

Nvidia, the largest company on Wall Street by total value, fell 4.4%, acting as the primary driver pulling the S&P 500 lower due to its significant weight in the index. CoreWeave, a cloud provider that has borrowed heavily to purchase Nvidia chips for rental, dropped 10.1% amid ongoing concerns about its debt load.

Oil markets reflected geopolitical tension, with Brent crude rising 0.5% to $113.73 per barrel and U.S. benchmark crude adding 0.6% to $100.08 per barrel. Brent prices have surged from below $97 at the start of the month on uncertainty about when the conflict with Iran will allow global energy supplies to normalize.

In U.S. bond markets, yields fell sharply Thursday as investors sought safety amid the stock sell-off. The yield on the 10-year Treasury dropped to 4.97% from 5.13% late Wednesday and from more than 5.30% earlier in the month. This decline occurred even as new data indicated fewer Americans applied for unemployment benefits last week, suggesting layoffs remain low and the economy may be stronger than economists anticipated.

Currency markets saw the U.S. dollar rise to 156.93 Japanese yen from 156.77 yen early Friday, while the euro remained unchanged at $1.1215.