Investing.com– Most Asian stocks were lower on Friday, with technology-heavy indexes posting big losses as the sector was hit by profit-taking, even as soft U.S. inflation data bolstered optimism for rate cuts .

Regional shares largely trailed overnight losses on Wall Street as technology heavyweights, particularly chipmakers and stocks with exposure to artificial intelligence, were hit by profit-taking. This saw the slippage of almost 2%.

U.S. stock futures were flat in Asian trade as the focus turned to the start of the second-quarter earnings season, with a number of heavyweight banks set to report on Friday.

Stock market losses came as US data came in softer than expected for June, leading investors to increase bets that the Federal Reserve will start cutting interest rates in September.

Asian tech hit by earnings, Nikkei falls 2%

Asia’s high-tech indexes, which had mostly outperformed their regional counterparts in recent weeks, were the biggest losers on Friday. The sector took a big hit after the AI ​​hype sparked a significant fall in valuations this year.

Traders appeared to be turning to other economically sensitive sectors, which are now set to benefit from lower interest rates.

Japan was emblematic of this trend, down 2.2% from record highs set on Thursday. The broader , which is much less tech-heavy than the Nikkei, fell 0.9 percent. Chipmakers Renesas Electronics Corp (TYO:), Advantest Corp. (TYO:) and Tokyo Electron Ltd. (TYO: ) fell between 4% and 7%, while technology investment house SoftBank Group Corp. (TYO: ) lost 3.2%.

South Korea fell 1.4% with memory chip leading SK Hynix Inc (KS:) losing over 3%.

TSMC ( TW: ) ( NYSE: ), the world’s largest contract chipmaker and a key driver of the recent tech rally, fell more than 4% from record highs.

Hong Kong outperforms bargain markets, ASX hits record high

But major Chinese tech stocks largely retreated from weakness in their global peers as relatively lower valuations in the sector led to a big hunt for a bargain.

Hong Kong listed Chinese tech majors such as Baidu (NASDAQ:) Inc (HK: ), Alibaba Group Holding Ltd (HK: ) and Tencent Holdings Ltd (HK: ) rose more than 2% each, helping the 2% rally. The index also moved further away from a two-month low hit earlier this week.

Chinese markets fell less than their broader counterparts, with indices also treading water on Friday.

Australia outperformed its Asian counterparts, rising 0.9% to a record high of 7,969.10. The index, which has a relatively light weighting of technology stocks, was boosted by flows into economically sensitive sectors such as mining and industrials.

These sectors broadly advanced in Asia as they are expected to benefit from a low interest rate environment.

India index futures showed a steady open, with gains in industrials and consumer stocks offsetting losses in the technology sector. The Nifty and had scaled to record highs earlier this week amid persistent optimism about the Indian economy.