Most Asian stock markets were subdued on Wednesday as a selective rebound in AI-related chip stocks failed to erase investor caution that emerged earlier in the week following a valuation-driven selloff in the semiconductor complex.
Oil prices remained elevated after the United States tightened sanctions on Iranian oil exports in response to recent attacks on commercial shipping in the Strait of Hormuz. That pressure on crude has kept inflation risks front of mind for markets, even as bargain hunting surfaced across parts of the semiconductor supply chain.
Wall Street closed lower overnight. In Asian trade, Nasdaq 100 Futures were up 0.4% while S&P 500 Futures gained 0.1%, reflecting a tentative tone among global equity benchmarks.
The cautious recovery followed a sharp market reaction to Samsung Electronics Co Ltd's blockbuster earnings report, which earlier in the week triggered a broad selloff across Asia's AI supply chain as investors questioned whether outsized semiconductor valuations can be justified by future earnings growth.
AI buying turns more selective
Technology names recovered some of Tuesday's losses, but investor attention appeared to be shifting toward separating companies that can deliver sustained earnings growth from those whose market prices may have outpaced fundamentals. OCBC analysts noted in a research note that artificial intelligence should remain the dominant investment theme in the second half of 2026, but they warned that purchasing will likely become more selective as investors place greater weight on actual earnings delivery relative to the sector's elevated valuations following a strong first-half rally.
South Korea's semiconductor stocks staged a rebound after leading Tuesday's regional decline. SK Hynix Inc jumped 5.1%, LG Innotek Co Ltd gained 2.1%, and Samsung Electronics edged 0.5% higher. Despite those individual gains, the KOSPI slipped 0.9%, extending a pullback after the benchmark surged more than 100% during the first half of the year.
In Taiwan, selective buying was visible across the AI supply chain. Hon Hai Precision Industry Co Ltd rose 0.4%, while Taiwan Semiconductor Manufacturing Co traded little changed following a more than 2% fall in the prior session. The Taiwan Weighted benchmark recovered 0.2%.
Japan's technology suppliers also saw mixed recovery. Murata Mfg Co climbed 4.3% and TDK Corp gained about 2%, while Sony Corp slipped 0.5%. The Nikkei 225 declined 0.6% and the TOPIX eased 0.3%.
Inflation prints and central bank focus
Beyond technology, investors parsed a batch of regional inflation data ahead of multiple policy decisions. Inflation releases from Thailand, Taiwan and the Philippines broadly pointed to easing headline price pressures. Maybank highlighted that firmer core inflation in the Philippines supports its expectation that the Bangko Sentral ng Pilipinas will deliver another 25-basis-point rate increase at its August 27 policy meeting.
Mainland Chinese markets were little changed ahead of Thursday's June inflation report. The Shanghai Shenzhen CSI 300 declined 0.04% while the Shanghai Composite inched up 0.2%. Hong Kong's Hang Seng rose 1.1%, recovering in part alongside regional technology stocks.
In Australia, the S&P/ASX 200 underperformed, falling 1.3% after Reserve Bank of Australia Assistant Governor Sarah Hunter warned that recurring global supply shocks, including those linked to geopolitical conflicts, reinforce the need for policymakers to keep inflation expectations anchored. Investors also awaited the Reserve Bank of New Zealand's policy announcement later on Wednesday, where the central bank was widely expected to raise rates by 25 basis points. New Zealand's benchmark NZX 50 fell 0.6%.
Near-term market drivers
Markets will next shift attention to the Federal Reserve's June meeting minutes, China's June inflation data, Bank Negara Malaysia's rate decision and next week's U.S. consumer price inflation report for fresh indications about the global interest-rate outlook. Corporate earnings will meanwhile be a key test of whether the AI investment wave continues to validate the semiconductor sector's lofty valuations.
Overall, the trading environment remained cautious - selective buying in beaten-down semiconductor names provided pockets of support, but elevated oil prices tied to sanctions and persistent geopolitical risk around key shipping lanes capped broad market gains.