Aspex Management, one of Asia’s largest hedge funds, lost about 16% in October as a sharp selloff in artificial intelligence-linked stocks hit technology markets across the region, exposing the risks facing investors heavily positioned in the sector.
The $14 billion Hong Kong-based fund recorded one of its largest monthly drawdowns, a person familiar with the matter told Reuters. However, its performance for the year remained positive, with Aspex still up 9% through October, the person said.
The losses came during a difficult month for technology investors, as concerns over the returns from massive AI infrastructure spending triggered a broad retreat from chipmakers, cloud computing companies and other businesses associated with the sector. The decline was especially severe in Asia, where several equity markets have substantial exposure to semiconductor manufacturers and technology suppliers serving global AI infrastructure developers.
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Founded by Hermes Li, a former head of Asia equities at Och-Ziff Capital Management, Aspex focuses on pan-Asian equities and has become an active investor in regional technology companies.
October’s decline was significant because it came after a strong run for AI-related stocks, which had attracted substantial investor capital on expectations that rising demand for computing capacity would generate sustained revenue growth for semiconductor manufacturers and other technology companies. The reversal showed how quickly those positions can come under pressure when investors begin questioning the financial returns supporting the investment boom.
Asian Technology Markets Suffer Heavier Losses
The Nasdaq Composite fell 5% in October, but losses across several Asian technology markets were considerably steeper. South Korea’s tech-heavy KOSPI index dropped 16%, while Taiwan’s benchmark declined 6%. China’s Star 50 index, which tracks high-technology companies, plunged 24%.
The scale of the declines reflects Asia’s exposure to the global semiconductor and AI hardware supply chain. South Korea and Taiwan are home to major chipmakers and manufacturers supplying components used in advanced computing systems. China, meanwhile, has a growing technology sector with companies seeking to compete across AI development, hardware and related services.
These markets have benefited from expectations that AI investment would sustain demand for advanced chips, memory products, semiconductor equipment and networking components. But the same concentration has left them vulnerable when investors reassess the pace of spending or question how much revenue technology companies can ultimately generate from their AI investments.
The immediate concern has been the gap between the scale of capital expenditure and the visibility of future returns. Hyperscalers and other technology companies have committed enormous sums to data centers, computing infrastructure and specialized chips. While suppliers have benefited from orders, investors are now examining whether the companies making those investments can generate sufficient earnings and cash flow to justify the spending.
That reassessment has implications beyond US technology stocks. Asian manufacturers are closely connected to the investment plans of major US and global technology companies. Any slowdown in data-center construction or a reduction in chip orders could affect revenue expectations across the supply chain.
The pressure has also been amplified by market positioning. When investors hold concentrated positions in stocks that have risen sharply, a change in sentiment can trigger rapid selling. Falling prices can prompt further reductions in exposure, particularly among funds managing risk limits or responding to losses in highly volatile holdings.
Goldman Sachs data showed that Asia was the worst-performing region in October among equity long-short hedge funds tracked by the investment bank. Asian stock pickers lost an average of 8.3%, compared with a 2.5% decline globally.
The difference indicates that the weakness extended beyond individual funds such as Aspex. Regional managers faced a difficult environment as technology-heavy markets fell more sharply than other major equity markets, creating pressure for investors with substantial exposure to Asian stocks.
Aspex’s Technology Investments Face a Changing Market
Aspex has been an active cornerstone investor in Hong Kong listings this year, including AI startup MiniMax and optical transceiver maker Zhongji Innolight. Both companies operate in areas linked to the expansion of AI infrastructure and computing demand.
Optical transceivers are important components in high-speed data transmission, connecting servers and networking equipment inside data centers. Demand for faster and more efficient communications infrastructure has risen alongside the deployment of AI computing systems, making suppliers in this segment beneficiaries of the infrastructure investment cycle.
MiniMax, meanwhile, operates in the AI sector, where investors have been assigning high valuations to companies based on expectations of future adoption and revenue growth.
The selloff presents a challenge for investors backing these businesses. Their long-term prospects may remain tied to expanding AI demand, but their market valuations are also sensitive to changes in expectations about spending, competition and profitability. Strong demand for AI infrastructure does not automatically guarantee that every company in the supply chain will maintain high margins or deliver the earnings growth embedded in its share price.
The market pressure has gained further momentum this month following major Democratic gains in the US midterm elections. Investors have become concerned that the political outcome could lead to greater regulatory scrutiny of the AI industry, particularly around the construction of large data centers.
That concern adds another layer of uncertainty for Asian technology suppliers. Tighter restrictions or delays affecting US data-center projects could alter the timing of infrastructure orders and influence demand for chips, networking equipment and related components.
The October loss has reduced the gains Aspex accumulated earlier in the year, but the fund’s reported 9% advance through October indicates that it remained in positive territory over the broader period. Its performance also illustrates the difficulty of maintaining returns in a market where exposure to high-growth technology companies can generate substantial gains during periods of optimism and sharp losses when sentiment reverses.
However, the broader issue for Asian hedge funds is how to position portfolios as investors become more selective about AI-related businesses. Companies with strong orders, established customers, and clear revenue visibility may continue to attract capital, while those whose valuations depend heavily on projected demand could face greater scrutiny.
The AI investment cycle has not necessarily ended, but the October selloff has raised the cost of assuming that rising infrastructure spending will translate into gains for every company associated with the sector.