Japan's Nikkei 225 plunged below the 50,000 mark on Wednesday before paring losses amid a wider decline in Asia markets as investors fled AI-related stocks.
The Nikkei lost 2.5% to close at 50,212.27 after falling over 4%, while the Topix was down 1.26% to close at 3,268.29. Shares in Japan's SoftBank Group plunged more than 10% Wednesday amid a broader drop in Asian AI-linked companies, tracking declines in U.S. peers.
South Korea's Kospi fell over 2% to end the trading day at 4,004.42, with chip heavyweights Samsung Electronics and SK Hynix posting losses of over 4% and 1% respectively. The small-cap Kosdaq shed 2.66% to end the trading day at 901.89.
The South Korean won weakened as much as 0.6% to 1,449.50 against the greenback, the lowest since April, data from LSEG showed.
Hong Kong's Hang Seng index was flat at 25,935.41 while mainland China's CSI 300 was up 0.19% at 4,627.26.
Australia's S&P/ASX 200 slipped 0.13% to 8,802, posting a comparatively modest loss.
CEOs of Goldman Sachs and Morgan Stanley on Tuesday cautioned investors to brace for a drawdown in markets over the next two years. "Finally, a sell-off hits the tape as the 'everything rally' takes a breather after comments from the CEOs, and Capital Group that markets were due a correction," said Andrew Jackson, head of Japanese equity strategy, at Ortus Advisors.
Overnight in the U.S., the S&P 500 declined 1.17% to close at 6,771.55, while the Nasdaq Composite traded down 2.04% to finish at 23,348.64. The Dow Jones Industrial Average lost 251.44 points, or 0.53%, to 47,085.24.
Palantir shares shed about 8%, even after the software company beat Wall Street's estimates for the third quarter and gave strong guidance, fueled by growth in its AI business.
AI stock gains have driven the S&P 500′s forward price-earnings ratio to above 23, near its highest level since 2000, per FactSet.
As those stocks have lifted the broader market to new highs in recent months, Anthony Saglimbene of Ameriprise said in an interview with CNBC that without a pullback, valuations were beginning to get "really stretched."
— CNBC's Sean Conlon and Fred Imbert contributed to this report.