Global markets took a sharp hit this week as a sell-off in AI-linked stocks accelerated, driven by fresh worries over US inflation and the mountain of debt propping up the AI sector. South Korea's Kospi 200, heavy with memory chip makers, fell more than 8% overnight to a six-month low, triggering circuit breakers along the way. SK Hynix dropped nearly 11% and Samsung Electronics fell 9.5%.
Japan's Nikkei 225 slid 4.9%. Chip maker Kioxia lost 11% and SoftBank, a major investor in OpenAI, dropped 10%. The losses followed a rough session on Wall Street, where the Nasdaq Composite fell 1.9% and the S&P 500 dropped 1.1%, its worst day since July.
The trigger was US inflation data showing prices rose 3.7% in September, the fastest pace since May. According to reporting this week, Deutsche Bank analysts led by Jim Reid called it a tumultuous 24 hours, with a strong inflation print feeding straight into growing fears about the AI trade. Reid noted the price increases were broad based, not just a result of energy costs tied to geopolitical tension.
The selling followed a warning from the International Monetary Fund earlier in the week that an AI stock crash could ripple through global financial stability, with Asian markets most exposed. China's Shanghai CSI 300 fell as much as 2.4% to its lowest since August 2025, and Taiwan's TSMC dropped 2% despite posting a sixth straight quarter of profit. European markets opened lower too, with the Stoxx 600 down 0.4% and Germany's DAX off 0.53%.
For small and medium-sized businesses, the direct market swings matter less than what sits behind them. Higher inflation raises the odds of further interest rate hikes, which means pricier loans and credit for firms that rely on borrowing to manage cash flow or fund growth. Businesses using AI tools or services built on venture funded AI companies should also watch for knock-on effects. A sharp correction in AI valuations could squeeze the budgets and pricing of vendors many smaller firms now depend on.