Stock markets in Japan and South Korea experienced a sharp decline, with semiconductor stocks leading the losses as investor sentiment came under pressure.

The Nikkei 225 index fell as much as 4%, dropping to its lowest level since May 22, while the Topix index declined by up to 2.7%. In South Korea, the Kospi index tumbled as much as 7.6%, reaching its lowest point since April 20.

Semiconductor-related stocks, including Tokyo Electron Ltd., Kioxia, Samsung Electronics, and SK hynix, led the downturn, with each falling more than 9%.

SK hynix once fell 30%, marking its largest record decline, while Kioxia dropped as much as 18%, the steepest fall since November last year.

The sell-off was triggered by a surge in the cost of insurance against debt default for Nvidia, following a series of AI-related deals totaling more than $750 billion. Technology stocks fell in response.

Hideyuki Ishiguro, Chief Strategist at Nomura Asset Management, commented that after the disclosure of significant investment transactions, the market perceived Nvidia's credit risk to have increased, which investors viewed as a negative signal.