AI champions vs the rest: Which markets have lost the most since the peak?
Global markets are reassessing the AI trade as concerns over spending returns, valuations and slowing earnings growth trigger sharp corrections in South Korea, Taiwan and US technology stocks
India has weathered global AI-led market sell-off better than some of its Asian peers, with Nifty 50 down 12 percent from its 2026 peak, while South Korea's Kospi fell 37 percent. Taiwan's Taiex, another major beneficiary of the semiconductor boom, is down 9.2 percent from its peak, while Hong Kong's Hang Seng has slipped 17 percent. The correction comes as investors increasingly question whether Big Tech's massive investments in AI will generate adequate returns, dragging the Nasdaq Composite nearly 3 percent lower last week on Friday to its lowest level in almost three months.
The sharp correction in South Korea and Taiwan comes after both markets had rallied sharply on the back of the global AI and semiconductor boom. Despite the recent losses, the Kospi is still up 47 percent so far this year, while Taiwan's Taiex has gained 59 percent, making it one of the strongest-performing markets globally in 2026. Foreign investors pull out the most from Taiwan, South Korea The correction has coincided with a sharp reversal in foreign investor flows, particularly across markets that have benefited from the AI trade.
Foreign investors have pulled out $31.78 billion from Taiwan in October so far, the highest outflow among the markets tracked, while South Korea has seen withdrawals of $14.6 billion. The two markets have also witnessed significant foreign selling over the course of the year, with cumulative outflows of $68.7 billion from Taiwan and $141.3 billion from South Korea. Meanwhile, FII outflows from India have been comparatively moderate.
FIIs have withdrawn $2.64 billion in October, taking year-to-date outflows to $30.9 billion. Record earnings fail to support South Korean chipmakers The extent of the correction in South Korea highlights how quickly sentiment can turn in markets that have benefited disproportionately from a single investment theme. The Kospi's sharp decline comes despite record earnings from the country's semiconductor majors, Samsung Electronics and SK Hynix.
Samsung's semiconductor division and SK Hynix together reported operating profits of around 190 trillion won in the third quarter. Yet, their shares have come under pressure. SK Hynix shares have halved from their peak this year, while Samsung stock has tumbled nearly 40 percent. Samsung's lack of a concrete update on shareholder returns and a 60 percent increase in its capex guidance added to investor concerns.
Meanwhile, SK Hynix's commentary that its capacity is sold out through 2028-29 offered little clarity on how much further its earnings could grow. Goldman Sachs has also cut its 12-month target for the Kospi by 25 percent to 9,000 from 12,000. Big Tech guidance puts AI spending under scrutiny The same concerns are playing out on Wall Street, where investors are increasingly looking beyond quarterly earnings to assess the returns from massive AI investments.
Peter McGuire, CEO of Trading.com, attributed the latest bout of selling to weaker guidance from Big Tech companies, despite some of them reporting relatively strong quarterly numbers. Alphabet's latest results offered some reassurance on the revenue front, even as investors questioned whether AI could eat into its traditional search business. Its overall revenue rose 25 percent year-on-year to $127.6 billion in the third quarter, while Google Search revenue grew 12 percent, with search query growth at its highest level in five years.
However, the company's rising investment bill remains a concern. Alphabet's capital expenditure more than doubled from a year earlier to $51.4 billion. Its free cash flow fell to negative $9.1 billion and remained in the red for a second consecutive quarter. Similarly, Meta recorded negative free cash flow of $2.12 billion in the third quarter, while Amazon's free cash flow deficit over the past 12 months widened to $42.4 billion, up sharply from $7.6 billion three months earlier.
With the Nasdaq already down 10 percent from its peak, McGuire said the tech-heavy index had erased its entire September rally and was trading near a key support area that had acted as a floor several times in May. "If the decline persists, the next important support is around its 200-day simple moving average of 29,578." Jefferies also warned that consensus earnings growth for AI-related stocks in the MSCI AC World Index is projected to slow from around 100 percent in 2026 to 30 percent in 2027 and 22 percent in 2028.
If Big Tech companies' capacity to invest weakens, the memory chip boom may not be sustainable. The coming quarters will therefore be crucial in determining whether earnings growth can keep pace with the massive investments driving the AI trade.
