The pullback reflects a broader rotation out of semiconductor plays into sectors like banking following strong lender earnings, leaving Asia disproportionately exposed given its heavy weighting toward chips. South Korea's Kospi has already lost roughly a third of its value since a June record despite the market being closed Friday, and Seoul's move to temporarily restrict tech-linked ETF listings and tighten retail deposit requirements signals authorities are actively trying to dampen volatility rather than let the correction run unchecked. Layered on top, oil's surge toward its steepest weekly gain since April adds a second, unrelated pressure point for equity investors, with analysts framing the coming days as pivotal for whether either side in the Iran conflict overplays its hand, a scenario that carries its own risk of physical damage to oil infrastructure.---A tech-led selloff is spreading across Asian markets as investors question whether the AI trade has run too far too fast, even as oil surges toward its biggest weekly gain in three months on an escalating and separate crisis in the Middle East.Summary:Tokyo and Taipei led losses across Asian markets on July 17, with technology firms under renewed pressure as investors take profits following this year's sharp rally.The Philadelphia Semiconductor Index has fallen about 19% from its June peak amid growing doubts over whether AI-related valuations have outrun the pace of actual returns.South Korea's Kospi bore the brunt of the broader selloff, having more than doubled in the first half of the year before losing about a third of its value since its June record, though Korean markets were closed Friday for a holiday.Japan's Nikkei sank as much as 4% intraday, with Advantest and SoftBank each losing around 9%, before later trading showed the index down about 2.8%.Investors rotated out of semiconductor stocks into sectors such as banking following strong lender earnings, leaving Asia more exposed given its heavier weighting toward chips.South Korea's government announced Thursday it will temporarily ban new listings of ETFs tied to certain major tech firms and raise minimum deposit requirements for retail investors in such products, aiming to curb volatility.MSCI's broadest Asia-Pacific index outside Japan was down slightly in early trade, while Nasdaq futures fell about 0.7% and S&P 500 futures declined roughly 0.4%.Oil prices were on track for their sharpest weekly rise in about three months, with Brent and US crude both set to gain more than 11% for the week, their largest weekly increase since April, after the US launched a new wave of strikes against Iran on Thursday.Asian equity markets fell sharply on Friday as a renewed selloff in technology stocks spread from Tokyo to Taipei, while oil prices headed for their steepest weekly gain in roughly three months as tensions in the Middle East escalated further, according to Reuters.Tokyo and Taipei led losses on a rough day for the region, with tech firms once again in the crosshairs as investors locked in gains following this year's rapid rally. The artificial intelligence boom has driven technology valuations to record levels as traders chased exposure to the sector while companies poured enormous sums into AI investment, but questions have mounted in recent months over whether those valuations have outpaced any actual return on the spending. The Philadelphia Semiconductor Index has now dropped about 19% from its June peak.South Korea's Kospi has borne the brunt of the broader pullback, having more than doubled in the first six months of the year before shedding roughly a third of its value since hitting a record in June. With Korean markets closed Friday for a holiday, the selling pressure instead concentrated in Tokyo and Taipei, both of which carry heavy tech weightings. Japan's Nikkei sank as much as 4% intraday, with chip-testing equipment maker Advantest and technology investment giant SoftBank each losing around 9% at the worst point, though the index later pared losses to trade down about 2.8%.The rotation out of semiconductor plays has accelerated this week as investors shifted into other sectors such as banking following robust earnings from major lenders, a move that has left Asia particularly exposed given its outsized exposure to chipmakers. MSCI's broadest index of Asia-Pacific shares outside Japan was little changed in early trade, while Nasdaq futures lost about 0.7% and S&P 500 futures declined roughly 0.4%, with Eurostoxx 50 futures down about 0.5%. South Korea's government added to the cautious mood, announcing Thursday it would temporarily halt new listings of ETFs tied to certain major technology firms and raise minimum deposit requirements for retail investors in such products in an effort to curb volatility.Analysts said Asia's AI trade thesis is being tested again after a strong rally led by semiconductors, with concerns resurfacing about potential overcapacity in the broader AI buildout. One analyst said the tougher question is how much longer the AI cycle can realistically run, noting it is difficult to time the peak of a cycle even though underlying fundamentals still look solid.Oil provided a separate source of pressure on sentiment. The US began a new wave of strikes against Iran on Thursday aimed at further degrading Iranian military capabilities, Central Command said. Brent and US crude futures were both on track to rise more than 11% for the week, their largest weekly gain since April. Analysts said the US and Iran remain far apart from any resolution, with the coming days likely to determine which side has overplayed its hand, a process that carries the risk of oil infrastructure being destroyed along the way. This article was written by Eamonn Sheridan at investinglive.com.