Asian Markets Recover After AI Chip Selloff and Weak US Jobs Data

Asian semiconductor stocks plummeted on July 1, 2026, triggering a global selloff that saw South Korea's Kospi Index drop nearly 8%. This volatility was driven by investor fears of AI overcapacity after reports that Meta Platforms Inc. planned to sell AI computing power to outside customers, and news that Apple Inc. was in talks to buy chips from Chinese firms. Samsung Electronics and SK Hynix saw shares fall 9% and 15% respectively, although both announced massive domestic investment plans totaling roughly $154 billion.

Markets experienced a reprieve on July 3 as investors shifted focus to U.S. economic data. The Bureau of Labor Statistics reported that June nonfarm payrolls increased by only 57,000, significantly lower than forecasts. This cooling labor market led traders to reduce expectations for imminent interest rate hikes by the Federal Reserve System, sparking rallies in Seoul, Sydney, and Singapore. While the Nikkei 225 remained weighed down by tech stocks, the broader region recovered as investors bet that rates would remain steady through September.

Despite the short-term bounce, analysts warned that the AI rally may be overextended. Federal Reserve Chair Kevin Warsh maintained a commitment to price stability, signaling that a rate hike before year-end remains possible. Additional market support came from reported progress in peace talks between the United States and Iran, which improved shipping activity through the Strait of Hormuz and lowered crude prices.