Foreign investors sharply reduced exposure to Asian equities in October as concerns over the scale of artificial intelligence infrastructure spending, hyperscalers’ cash burn and potential regulatory restrictions weighed on technology-linked markets. According to LSEG data reported by Reuters, investors withdrew a net $49.77 billion from equities across South Korea, Taiwan, India, Indonesia, Thailand, Vietnam and the Philippines.

Technology Markets Bear the Brunt of the Outflows

The scale of the withdrawal reflects a broader reassessment of the AI investment cycle. Foreign investors sold a net $30.68 billion of Taiwanese equities in October, the largest monthly outflow from the market since at least January 2008. South Korea recorded another $14.59 billion of net foreign selling, leaving the two markets responsible for the overwhelming majority of the regional outflows.

The pressure was particularly significant because Taiwan and South Korea are closely linked to the global semiconductor and technology supply chain. Concerns that the enormous capital requirements of AI infrastructure may take longer to generate adequate returns have therefore become increasingly relevant for markets whose valuations and earnings expectations are closely connected to technology demand.

Regulatory Risk Adds Another Layer of Uncertainty

Investor concerns were not limited to corporate spending. Ahead of the U.S. midterm elections, expectations of tighter environmental reviews and potential AI-related regulation raised questions about the pace of new data-center construction and future demand for advanced chips. Democratic victories in several states where opposition to new data centers has grown kept those concerns in focus after the elections.

The broader regional performance reinforced the shift in capital. The MSCI Asia Pacific ex-Japan index fell 6.91% in October, compared with a 1.69% decline in the MSCI All Country World Index. The relative weakness may have encouraged international investors to reduce Asian exposure in favor of developed-market equities, particularly as U.S. stocks demonstrated greater resilience during the month.

Capital Rotation Extends Into November

The selling has not yet fully reversed. Foreign investors have withdrawn a further $22.6 billion from the seven Asian markets so far in November, including $19.76 billion from Taiwan and $8.32 billion from South Korea. The continued outflows suggest that concerns over AI spending, profitability and regulatory uncertainty remain influential in international portfolio allocation decisions.

However, the regional picture is not uniform. India recorded a second consecutive monthly foreign outflow in October, totaling $3.6 billion, but attracted $5.68 billion of net foreign investment in November so far. HSBC has upgraded Indian equities to overweight, citing resilient earnings and more reasonable valuations. Indonesia and Thailand also experienced October outflows, while Vietnam and the Philippines recorded modest inflows.

AI Spending and Global Capital Allocation Remain in Focus

The October withdrawals indicate that international investors are becoming more selective about the companies and markets most exposed to the AI capital cycle. U.S. assets may also be benefiting from relative performance, while the rise in the 10-year U.S. Treasury yield to 5.3% in early October provided another potential destination for global capital.

Going forward, investors will be watching AI infrastructure spending, hyperscaler cash generation, semiconductor demand and regulatory developments for signs of whether the October outflows represent a temporary repositioning or a more persistent shift in regional allocations. The divergence between markets such as Taiwan and South Korea and more resilient destinations such as India could become increasingly important as global investors reassess valuations, earnings visibility and the long-term economics of the AI investment cycle.