This article first appeared on GuruFocus.

Asian markets just delivered a jolt to investors who spent most of the year riding the region's AI boom as if it could go on forever. Instead, foreigners have yanked nearly $4.6 billion each out of Taiwanese and Korean equities this month, a pace that could be the sharpest since March and April. It's a turn that comes as valuations stretch, risk appetite cools, and the prospect of a December Fed rate cut fades into something more uncertain. Even Japan has slipped into the crossfire, with foreign investors selling $2.3 billion of local stocks through Nov. 7 or $7.3 billion when futures are included suggesting that the pullback is broad, not isolated.

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For months, investors treated Asia's AI suppliers as the ultimate pick-and-shovel trade, the kind of hardware backbone they assumed could stay insulated from volatility as global tech giants kept spending. But that confidence could be softening. A mix of mismatched earnings expectations and questions around circular deals transactions where buyers and sellers do business with each other has sparked debate over whether revenues and valuations may be getting ahead of themselves. Korea's Kospi, which had rocketed 84% from April into early November, is now off its highs, while Taiwan's Taiex has surrendered part of its recent gains, hinting that the once-relentless momentum is starting to feel less inevitable.

China isn't helping the mood. While foreign flow data isn't available, the Hang Seng Tech Index has slipped deeper into technical-correction territory, weighed down by fresh disappointment from Tencent (TCEHY) and Baidu (NASDAQ:BIDU). Tencent's shares fell after it lowered its 2025 capital-spending outlook, and Baidu's latest AI model rollout failed to spark enthusiasm. To some, like Van Eck strategist Anna Wu, this phase could be standard profit-taking a short-term sentiment pullback rather than a structural crack in the long-term AI story. But the speed of the reversal is a reminder that when expectations run hot, even a small shift in tone can be enough to shake a market that had been pricing in perfection.