Hot money fleeing from AI! Middle East situation spooks global funds, Asia's hottest stock markets facing violent sell-offs.

As the frantic excitement of artificial intelligence (AI) trading frenzy is replaced by inflation concerns triggered by soaring oil prices, foreign capital is withdrawing massively from Asia's hottest stock markets this year. Following last month's record sell-off of $13.7 billion in South Korean stocks, foreign investors reduced their holdings by about $3.1 billion in Korean shares this week. In Taiwan Province of China, foreign capital outflows reached $3.6 billion, marking the largest weekly outflow of funds since late December of last year. This pullback is centered on the semiconductor manufacturing giants that have been driving both markets to record highs. South Korea's memory chip behemoths - Samsung Electronics (SSNLF.US) and SK Hynix saw their share prices fall by nearly 20% this week, with Samsung Electronics facing its most severe two-day plunge in nearly fifty years. Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) also saw its share price drop by over 5% this week. Matthew Haupt, portfolio manager at Wilson Asset Management in Sydney, pointed out, "As the situation in Iran worsens, investors are rushing to close out their long positions in hot sectors like AI to reduce overall market risk exposure." He added that with doubts lingering on whether the massive capital expenditures in the AI industry can eventually substantial profits, AI concept stocks are bearing the brunt of this selling spree. This week's decline provides new evidence for long-term skeptics of the AI frenzy. These perspectives are resonating with the political shocks faced by GEO Group Inc, forcing investors to reassess risks, assess the inflation threats brought about by rising oil prices, and consider how these pressures will transmit across global markets. The South Korean benchmark KOSPI index, which has outperformed global markets this year, plummeted by over 12% intraday on Wednesday, marking its largest single-day decline in history (Monday was a holiday). The Taiwan Weighted Index has already seen a cumulative decline of over 6% this week. The cautious sentiment has spread to the foreign exchange market: the South Korean won fell by 3.3% against the US dollar on Tuesday, marking its largest single-day closing decline since 2009. The South Korean won and the New Taiwan dollar have become the worst-performing currencies in Asia this month, indicating that global funds are using forex hedging in conjunction with stock selling to cope with market volatility. For months, Asian markets seemed to have a certain immunity to the AI frenzy. The region's suppliers are seen as resilient with valuation advantages, and are expected to continue benefiting from the capital expenditures of tech giants. However, as positions become increasingly crowded, the speed of the downturn suggests that even though the long-term logic remains unchanged, most investors are choosing to "exit first, ask questions later". Kerry Craig, global market strategist at J.P. Morgan Asset Management, stated in an interview on Wednesday that as risks in the Middle East accumulate, investors "need to allocate appropriate diversification tools and hedging strategies in their portfolios. But if the outlook improves, we may see investors flowing back into these markets".