Taiwan shares tumble on crude price spike, AI bubble concerns

Taipei, July 24 (CNA) Shares in Taiwan took a beating, plunging over 1,100 points Friday as a spike in crude oil prices amid escalating military conflicts in the Middle East and lingering concerns over a possible AI bubble spooked investor sentiment, dealers said.

The Taiex, the Taiwan Stock Exchange's benchmark index, ended down 1,195.97 points, or 2.67 percent, at 43,654.84 after moving between 43,607.40 and 44,769.39. Turnover totaled NT$792.44 billion (US$24.49 billion), the lowest level since April 7, when trading value stood at NT$584.69 billion.

"Investors were shocked as they witnessed crude oil prices breach US$100 per barrel again amid growing geopolitical unease," Mega International Investment Services analyst Alex Huang said.

"Inflation concerns are running deeper as investors thought the U.S. Federal Reserve could raise interest rates, so what came to their minds was to trim rate-sensitive tech holdings," Huang said.

Following a 2.15 percent decline in the Nasdaq index overnight, the local electronics index fell 2.99 percent after contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), which accounts for over 40 percent of total market value, shed 2.29 percent to close at NT$2,350.00.

"The sell-off in AI-related stocks such as TSMC also reflected fears that cloud service providers cannot generate satisfactory sales from their massive AI infrastructure spending," Huang said. Overnight, Alphabet, Google's parent company, reported its free cash flows had turned negative after heavy AI investments.

Among other chip stocks, smartphone IC designer MediaTek Inc. lost 3.23 percent to end at NT$3,750.00, IC packaging and testing firm ASE Technology Holding Co. fell 5.55 percent to close at NT$613.00, and United Microelectronics Corp. (UMC), a smaller contract chipmaker, slid 7.58 percent to end at NT$128.00.

Also in the tech sector, power management solution provider Delta Electronics Inc. dropped 5.05 percent to close at NT$1,785.00 and iPhone assembler and AI server maker Hon Hai Precision Industry Co. ended down 1.94 percent at NT$252.50.

"While funds rotated out of tech stocks, investors rushed to park their funds in defensive telecom stocks," Huang said. Chunghwa Telecom Co. rose 0.72 percent to close at NT$139.00, Taiwan Mobile Co. added 1.34 percent to end at NT$113.50, and Far EasTone Telecommunications Co. gained 2.93 percent to close at NT$105.50.

Select food stocks were also seen as safe havens, with Uni-President Enterprises Corp. up 0.52 percent to end at NT$77.40 and Great Wall Enterprise Co. up 1.58 percent to close at NT$57.80.

Buying also rotated into some financial stocks: Mega Financial Holding Co. rose 0.62 percent to end at NT$48.45, while E. Sun Financial Holding Co. added 0.84 percent to close at NT$35.95.

"Today's turnover shrank to its lowest level since early April, indicating that many investors were reluctant to buy on the dip as they feared more volatility ahead," Huang said. "It is possible the Taiex will test Monday's intraday low of 41,967 soon."

According to the Taiwan Stock Exchange, foreign institutional investors sold a net NT$60.95 billion worth of shares on the main board Friday.