The selloff overshadowed a drop in oil prices that came even as Yemen's Houthis step up their attacks on Saudi Arabia, fanning tensions in the Middle East and raising further concerns about supplies.

South Korea's Kospi tanked more than six percent as chip titans SK hynix and Samsung took a beating following reports that China's CXMT had made progress on new technology to boost memory density, which other firms have been working on.

The firm was looking at releasing a new server-memory product based on the structure by the end of the year, the reports said.

"China continues to narrow the competitive gap with US companies across AI models, humanoid robotics, memory and other parts of the technology supply chain," said Pepperstone's Chris Weston.

"Its ability to develop increasingly competitive products at lower costs is challenging established assumptions around market share, pricing power and the durability of margins."

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Japanese stocks were also sharply lower, with the Nikkei 225 losing nearly three percent as chipmaker Kioxia tumbled more than 12 percent, while Tokyo Electron and Advantest were off more than six percent.

A 1.8 percent drop in TSMC helped drag Taipei down more than two percent. There were also sizable losses in Hong Kong, Shanghai, Sydney, Wellington and Manila.

The global tech sector has been slowly recovering from a summer rout that wiped trillions off markets amid concerns about elevated stock valuations and when firms would see returns on their vast investments.

They followed hefty selling in New York, where SanDisk gave up 6 percent and Micron Technology shed 3.9 percent.

Adding to the unease among traders were comments from Broadcom CEO Hock Tan, who likened the recent investor AI buying frenzy to gambling.

"A lot of investors have no clue what they are investing in," he said. They "set very extreme expectations only to find out that it’s almost like they are in a casino".

He also warned the industry had not yet found a sustainable model, pointing out that ChatGPT-maker OpenAI reported billions of dollars in losses.

"For now it's still losing money because they're spending a lot on training," Tan said. "So frankly, it doesn't tell anything at this point except that there is a lot of potential revenue growth out of providing frontier generative AI models."

OpenAI's reporting of annualized revenue of $50 billion in September indicated a viable business model but offered few guarantees over the long term.

Pepperstone's Weston added: "The funding requirements behind the AI buildout are becoming an increasingly important consideration for investors, particularly as questions around capital intensity and future returns become more prominent."

Traders are looking ahead to the release of earnings from leading tech firms this month and next, hoping for an idea about their outlook for the AI sector in light of rising borrowing costs and recent volatility.

Traders are keeping tabs on the Middle East after several powerful explosions rattled Riyadh on Monday night following a series of Houthi attacks on the capital's airport in recent days that have killed at least 18 people.

A Houthi official on Monday warned the US it would receive a "painful response" if it entered the war in Yemen, after Saudi Arabia reportedly requested Washington's help in dealing with the group.

Yemen's civil war -- in which a Saudi-led military coalition supports the government against the Iran-backed Houthis -- reignited in July, months into the wider regional conflict that has roiled energy markets and plunged the Middle East into crisis.

The Houthis quickly began targeting Saudi oil facilities, tankers and transport hubs, including a string of lethal strikes on Riyadh's airport, rocking the world's top oil exporter.

Still, both main crude contracts dropped more than 1 percent Tuesday, though Brent remains stuck above $100, keeping constant upward pressure on global inflation.

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