Markets Stumble as AI Bubble Fears Resurface, Oil and Metals Retreat
Global financial markets faced a broad sell-off on Monday, with Asian equities and U.S. stock futures sliding as investor enthusiasm for artificial intelligence stocks showed signs of fatigue and oil prices retreated sharply.
In Seoul, the benchmark Kospi index tumbled 4.6% to close at 4,982.54, its steepest decline in months. The sell-off was led by major tech firms, with Samsung Electronics losing 3.5% and memory chip giant SK Hynix plunging 5.6%. The drop punctuated a record-breaking rally for the index, which had been fueled by deals linking local firms to AI leaders like Nvidia, raising fresh questions about sector valuations.
"The momentum behind AI stocks has been incredible, but today's action suggests the market is hitting a pause to reassess fundamentals," said David Chen, a portfolio manager at Horizon Capital in Singapore. "We're seeing profit-taking in names that have run too far, too fast."
The retreat wasn't confined to equities. In commodity markets, U.S. benchmark crude oil fell $2.80 to $62.41 a barrel, while Brent crude dropped $3 to $66.32. The decline followed comments from President Donald Trump, who told reporters aboard Air Force One that Iran was "seriously talking" to prevent it from obtaining nuclear weapons, easing geopolitical supply concerns.
Precious metals, after a historic rally, also reversed course. Gold fell 1% after a dramatic 11.4% plunge on Friday, settling at $4,745.10 an ounce. Silver, which had soared alongside gold, managed a 2% gain on Monday following its own steep Friday drop.
Market sentiment appeared further weighed down by political uncertainty. Investors are scrutinizing the potential impact of President Trump's nominee to lead the Federal Reserve, Kevin Warsh. S&P 500 futures were down 0.9%, while Dow Jones Industrial Average futures fell 0.5%.
"The Warsh nomination is a wildcard," said Maya Rodriguez, chief economist at Sterling Analytics in New York. "Markets are trying to gauge whether this signals a shift toward a more politically influenced Fed, which could threaten its inflation-fighting credibility long-term."
A hotter-than-expected U.S. wholesale inflation report released Friday added to the cautious mood, potentially limiting the Fed's ability to cut interest rates further.
The regional picture was mixed but largely negative. Japan's Nikkei 225 managed a slight 0.2% gain to 53,422.01, but Hong Kong's Hang Seng fell 2%, and the Shanghai Composite lost 1.1%. Australia's S&P/ASX 200 dropped 1.1%, and Taiwan's Taiex slid 2.1%.
Some analysts viewed the pullback as a healthy correction. James Keller, a veteran trader in Hong Kong, offered a more cynical take: "This is the sound of the bubble leaking. AI is transformative, but not every company slapped with the label is worth triple its value from last year. The Fed drama is just the excuse du jour for a market that got ahead of itself."
In Friday's Wall Street session, which set the tone for Monday's global trading, the S&P 500 fell 0.4%. The Nasdaq Composite, heavy with tech stocks, declined 0.9%. Tesla provided a bright spot, rising 3.3% after a post-earnings rebound, while Apple edged up 0.5% following its own strong quarterly report.
The dollar strengthened slightly against the yen, trading at 155.10 yen, while the euro rose to $1.1867.