Valuations of US semiconductor and AI sectors pull back, triggering sell-offs in Asian markets

The valuation correction of the US semiconductor and AI sectors has affected Asian markets, with a large-scale sell-off in Japan and the Asian technology supply chain on July 17. The Philadelphia Semiconductor Index declined by 4.3% on July 16. TSMC's net profit in the second quarter increased by 77.4% year-on-year, and it raised its full-year capital expenditure guidance from $52 billion–$56 billion to $60 billion–$64 billion, but its ADR fell by 2.3%. Bloomberg macro strategists said that the market downturn in the US triggered leveraged equity fund liquidations, leading to massive quantitative capital outflows from Japanese tech stocks such as Kioxia, Tokyo Electron, Advantest, and SoftBank. Geopolitical tensions, commodity valuation pressures, and concerns over inflation and high interest rates have increased the downside risks for high-premium growth technology stocks.