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(Bloomberg) — Asian stocks pared earlier losses, following US tech shares’ drop, on speculation regional companies have a broader mix of operations that makes them more resilient to the software-driven selloff.
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MSCI’s Asian gauge of equities erased an earlier drop of as much as 0.6%, boosted by a rotation into more economically sensitive industries such as financials and industrials. The US declines were fueled by concern the rollout of artificial intelligence will decimate software companies and hurt profitability across the tech industry.
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Elsewhere, oil rose after the US Navy shot down an Iranian drone headed toward an aircraft carrier in the Arabian Sea. Bitcoin dropped to its lowest since Donald Trump retook the White House just over a year ago.
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“While Asia’s tech sector will see some overall pressure, energy and equipment and chip stocks should fare better than software,” said Matthew Haupt, a fund manager at Wilson Asset Management in Sydney. “The selloff in Asia tech should be less intense.”
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Software stocks had dropped from the open in Asia, tracking losses in their US peers. The selloff was triggered off by the release of a productivity tool for in-house lawyers by AI startup Anthropic. That led to a slide in stocks associated with legal software and data services, and then snowballed to include much of the tech sector.
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Despite Tuesday’s US stock losses, most shares in the S&P 500 actually rose. FedEx Corp., an economic barometer, extended a record-breaking rally. Walmart Inc. topped $1 trillion in market cap.
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“This year is the defining year whether companies are AI winners or victims, and the key skill will be in avoiding the losers,” said Stephen Yiu, chief investment officer at Blue Whale Capital. “Until the dust settles, it’s a dangerous path to be standing in the way of AI.”
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A Goldman Sachs Group Inc. basket of US software stocks sank 6% on Tuesday, its biggest one-day decline since April’s tariff-fueled selloff. The tech-heavy Nasdaq 100 Index fell 1.6%.
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Bets on AI companies have dominated the US equity market for the past three years, but a growing number of investors are now wagering that the run, led by the “Magnificent Seven” megacaps, is giving way to broader market participation. A marked rotation has taken place in 2026, with value shares far outpacing growth.
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“Bifurcated action is characterizing today’s Wall Street trading, as tech surrenders the floor to cyclicals even as Palantir delivered a blockbuster beat-and-raise last night, which initially boosted optimism regarding AI prospects,” said Jose Torres at Interactive Brokers.
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Brent advanced more than 1% to above $68 a barrel, after adding 1.6% on Tuesday. The Iranian-drone skirmish spooked oil markets, but President Donald Trump reiterated the sides are maintaining diplomatic talks, and White House Press Secretary Karoline Leavitt confirmed US-Iran negotiations are still scheduled for Friday.
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