Global investors are rapidly unwinding positions in Asia’s high-flying artificial intelligence stocks as rising oil prices and escalating geopolitical tensions trigger a broad risk reset across global markets.

Foreign funds sold roughly $3.1 billion worth of South Korean equities this week after already offloading a record $13.7 billion in February. In Taiwan, overseas investors dumped an additional $3.6 billion of stocks, putting the market on track for its largest weekly outflow since late December.

The sudden shift reflects growing concern that an oil-driven inflation shock could derail the momentum behind the global AI rally.

Chipmakers Lead the Selloff

The selloff has hit semiconductor giants that had previously fueled market gains. Shares of Samsung Electronics and SK Hynix have each fallen nearly 20% this week, marking one of the sharpest corrections in years for Korea’s flagship technology stocks.

Meanwhile, Taiwan’s dominant chipmaker Taiwan Semiconductor Manufacturing Company has declined more than 5% over the same period.

These companies were central to the global AI boom, supplying memory chips and advanced semiconductors needed to power large-scale artificial intelligence infrastructure.

Geopolitical Shock Meets AI Valuation Concerns

The retreat in technology stocks comes as escalating conflict in the Middle East raises fears of sustained energy price increases. Investors are increasingly worried that higher oil prices could reignite inflation pressures and disrupt expectations for central bank easing.

Portfolio managers say the selloff reflects a broader effort to reduce exposure across risk assets.

Crowded positions in AI-linked equities made them particularly vulnerable to profit-taking once market sentiment shifted.

The rapid unwind has renewed debate over whether the AI rally had become overheated after months of extraordinary gains driven by massive capital spending by technology giants.

Asia Markets Hit Hardest

South Korea’s benchmark Kospi index — which had been the world’s best-performing market earlier this year — plunged more than 12% at one point on Wednesday, putting it on track for its worst single-day performance on record.

Taiwan’s Taiex index has dropped more than 6% this week, reflecting heavy selling pressure from international investors.

Currency markets have also reacted sharply. The Korean won fell 3.3% against the U.S. dollar in a single day, its steepest decline since 2009. Both the won and the Taiwan dollar have become some of the weakest currencies in Asia this month.

The simultaneous decline in equities and currencies suggests that global funds are not only exiting stock positions but also hedging exposure to regional volatility.

From AI Euphoria to Risk Management

For months, Asian technology stocks had been viewed as direct beneficiaries of the global AI investment boom. Suppliers across South Korea and Taiwan were considered undervalued and well positioned to profit from massive data center and semiconductor spending.

However, the speed of the recent correction highlights how quickly sentiment can shift when macroeconomic risks collide with crowded trades.

While many investors still believe the long-term outlook for artificial intelligence remains strong, the current market environment is forcing funds to reassess positioning, reduce leverage, and prioritize liquidity.