"AI Scare" Catalyst Exposes Global Market Fragility: Divergence Between US and Asian Equities

This analysis is based on the Seeking Alpha commentary [1] published on February 14, 2026, titled “Weekly Commentary: Recalling 1991,” which examines the “AI scare” as a catalyst exposing underlying market fragility. The article highlights significant global equity movements, with South Korea’s KOSPI surging 8.2%, Japan’s Nikkei up 5.8%, Thailand +5.6%, Turkey +4.9%, Taiwan +4.1%, Vietnam +3.9%, Indonesia +3.5%, Australia +2.4%, and Brazil and Canada both up 1.9% [1].

The timing of this event—week of February 6-13, 2026—reveals a critical divergence in global market sentiment. While Asian markets, particularly those tied to semiconductor manufacturing, continue to benefit from AI infrastructure spending, US markets are experiencing a significant rotation away from AI-exposed growth stocks toward defensive sectors.

The US market experienced significant turbulence during this period. The S&P 500 recorded three consecutive days of losses from February 10-12, with a steep 1.79% decline on February 12 [0]. The NASDAQ Composite, heavily weighted toward technology stocks, suffered even more severe losses—dropping 2.36% on February 12 and 0.91% on February 11 [0]. This tech-led selloff reflects the “AI-phoria to AI-phophobia” shift described by veteran investor Ed Yardeni [2].

A clear sector rotation emerged during this period:

• Technology
  (-0.68%): Worst performing sector on February 13 [0]
• Utilities
  (+3.55%): Best performing sector [0]
• Energy
  (+1.64%) and
  Basic Materials
  (+1.56%) also outperformed [0]

This represents a significant rotation from AI-exposed growth stocks toward defensive and cyclical sectors—a pattern consistent with risk-off sentiment and historical precedents from recessionary periods.

The “AI scare” has expanded beyond technology to affect financial services stocks. Charles Schwab shares fell 7.4% and Raymond James Financial dropped 8.7% following the launch of AI-powered tax planning tools that threaten traditional advisory business models [3][4]. This follows a similar pattern to the software sector selloff, where AI tools demonstrated capabilities to automate tasks previously requiring significant human expertise.

The expansion of AI disruption from software to financial services suggests accelerating adoption cycles and broader implications for white-collar professions. According to Apollo’s chief economist Torsten Sløk, the current AI boom represents even greater market concentration risk than the dot-com bubble [5].

A notable divergence exists between US and Asian markets. The KOSPI reached record highs, surpassing 5,400 for the first time, up 31% year-to-date [6][7]. The Japanese Nikkei hit a record 58,048 [8]. Korean markets showed extreme volatility with 4.82% daily average volatility—the highest among major global markets [9].

This divergence suggests that while US markets worry about AI disruption, Asian markets—particularly those tied to semiconductor and chip manufacturing—continue to benefit from AI infrastructure spending. The AI scare originated partially from Chinese AI startup DeepSeek, whose efficient AI models triggered concerns about the return on massive AI infrastructure investments [10].

The analysis reveals several critical cross-domain correlations:

1. Geographic Divergence
   : US and Asian markets are experiencing opposite trajectories—US markets rotating out of tech due to AI disruption fears, while Asian markets (especially Korea and Japan) surge on AI infrastructure momentum.

2. Sector Contagion
   : AI disruption has spread from software companies to financial services within two weeks, indicating accelerating adoption cycles and broader market impact.

3. Historical Pattern Recognition
   : The 1991 reference suggests the author sees parallels to early 1990s recession dynamics—characterized by economic uncertainty, technology transformation, and market concentration risks.

4. Volatility Clustering
   : Korean market’s extreme volatility (4.82% daily) indicates potential structural vulnerabilities in highly concentrated markets [9].

The DeepSeek effect represents a paradigm shift in AI economics. Chinese AI startups demonstrating competitive efficiency with lower infrastructure costs challenge the “higher spending equals better AI” narrative that has dominated US tech investment thesis [10]. This has implications for:

• Capital expenditure expectations for major US tech companies
• Semiconductor demand projections
• Valuation multiples for AI-exposed companies

Market concentration remains a critical concern. The US accounts for two-thirds of global market capitalization [11], creating systemic vulnerability to sector-specific corrections.

1. Sector Concentration Risk
   : Market remains highly concentrated in technology, creating elevated systemic risk if AI disruption accelerates beyond current expectations.

2. AI Disruption Breadth
   : The rapid expansion of AI disruption from software to financial services suggests accelerating adoption cycles that could affect additional sectors.

3. Valuation Compression
   : AI-exposed sectors may face earnings multiple compression if growth expectations fail to materialize or if competition intensifies.

4. Volatility Disparity
   : Korean market volatility indicates potential structural vulnerabilities in markets with heavy semiconductor concentration [9].

1. Defensive Sector Rotation
   : Current market conditions favor utilities, energy, and basic materials—sectors that typically outperform during periods of uncertainty.

2. Asian Market Momentum
   : Strong institutional flows into Korean markets ($77 billion cash pile ready to deploy) suggest continued momentum [7].

3. Financial Services Adaptation
   : Companies that successfully integrate AI may emerge stronger; the current selloff may present entry opportunities for long-term investors.

The current market dynamic appears to be in an acute phase (February 2026), with the AI scare narrative still evolving. Key catalysts to monitor include:

• DeepSeek and Alibaba AI model releases [10]
• US jobs data and Federal Reserve policy implications
• Q1 2026 earnings reports from major tech companies
• Sustainability of sector rotation patterns

The “AI scare” represents a significant market correction catalyst that has exposed underlying fragility in US equity markets while creating divergent opportunities in Asian markets. Key data points include:

• US Market Performance
  : S&P 500 down 1.79% on February 12; NASDAQ down 2.36% [0]
• Sector Rotation
  : Technology worst performer (-0.68%); Utilities best (+3.55%) [0]
• Asian Gains
  : KOSPI +8.2% (record high); Nikkei +5.8% (record 58,048) [1][8]
• Financial Services Impact
  : Schwab -7.4%; Raymond James -8.7% [3][4]
• Korean Volatility
  : 4.82% daily average—the highest globally [9]

The historical reference to 1991 suggests market participants should monitor for patterns consistent with early 1990s recession dynamics, including technology transformation cycles and concentration risks. Current market conditions warrant careful monitoring of sector rotation sustainability and the pace of AI disruption expansion across industries.