The MSCI Asia Pacific Index edged down 0.2%, with shares in South Korea — a bellwether for AI investments — falling 0.5%. Attention later will turn to mainland China’s markets, which are set to reopen after the Lunar New Year holiday period.
The moves in Asia came after the S&P 500 Index slid 1%, with tech, delivery and payment shares hit as Citrini Research laid out the potential AI risks to various industries. International Business Machines Corp. tumbled 13% in its worst day since October 2000 as Anthropic said its Claude Code could help modernize COBOL, a programming language mainly run on IBM computers.
Amid lingering uncertainty over President Donald Trump’s tariffs, concerns about AI-driven disruption are prompting traders to dump shares of any company seen at the slightest risk of being displaced. Those worries have also grown despite solid results from megacaps amid doubts over whether big investments in the technology will pay off soon.
“The software selloff is a reminder of what can happen when momentum-driven sectors shift into reverse,” said Steve Sosnick at Interactive Brokers. “The broader, more important question is: How many sectors can go into reverse before they drag the broader market along with them?”
While software companies have been among the hardest hit, insurance brokers, private credit firms, cybersecurity and even real estate services stocks in the US have all been caught up in the so-called AI scare trade.
Asian shares have outperformed, with MSCI’s regional gauge rising 12% this year compared with a 0.1% decline in the S&P 500 over the same period. That marks the index’s strongest start to a year relative to the US benchmark on record.In other corners of the market, Treasuries and gold held their gains from the US session, when traders pared back risk and sought haven assets. Bitcoin continued to trade below $65,000. The dollar was little changed in early trading on Tuesday.
In other commodities, oil steadied as Trump said his preference was for a nuclear deal with Iran ahead of talks between the two nations this week.
Meanwhile, questions over US tariffs added to the downbeat mood on Monday.
After the Supreme Court’s decision Friday to nix Trump’s “reciprocal” tariffs, the White House announced plans to replace the prior levies with a new, across-the-board 15% tariff on US imports. The European Union froze ratification of its US trade deal amid the uncertainty.
The US is readying a spate of additional national security investigations that would enable Trump to impose new tariffs, as the administration seeks to rebuild his global tariff regime.
The administration is considering new national security tariffs on a half-dozen industries, the Wall Street Journal reported, citing people familiar with the plans.
“The push and pull with tariffs is likely to be a distracting theme for markets for the remainder of the year, albeit with less volatility than the initial shock last April,” said Michael Landsberg at Landsberg Bennett Private Wealth Management.
