Asian equity markets witnessed broad-based selling as the MSCI Asia Pacific Index dropped as much as 3.5%, extending its decline to more than 10% from its June 22 peak and placing the regional benchmark on course for a technical correction.

The decline was led by semiconductor stocks, with South Korean chipmakers Samsung Electronics and SK Hynix recording sharp losses. Their weakness pushed the Kospi Index down more than 10% during intraday trading, reflecting heightened pressure on technology shares across the region.

The selloff follows a sharp decline in global semiconductor stocks amid growing concerns that investor positioning in the sector had become overcrowded. Market participants have become increasingly cautious about the sustainability of the artificial intelligence-driven rally that has fueled significant gains in chipmakers over the past year.

Although Nvidia Corp. is reportedly pursuing a new wave of artificial intelligence-related investment agreements valued at more than $750 billion, the announcement failed to improve market sentiment. Instead, some investors viewed the continued surge in AI spending as evidence of elevated valuations and demand that may be difficult to sustain over the longer term.

Market participants noted that sentiment has shifted rapidly from optimism to caution, with investors reacting negatively to developments surrounding the AI sector rather than focusing solely on underlying business fundamentals.

Broader Asian markets also traded lower as investors prepared for several key global events scheduled this week. These include monetary policy decisions from the US Federal Reserve, the Bank of Japan and the Bank of England, along with quarterly earnings from several major global technology companies, all of which are expected to influence market direction in the near term.