Asian stock markets struggled Tuesday following another AI-fuelled tech selloff on Wall Street that overshadowed a plunge in oil prices and signs of a possible breakthrough in talks to end the Iran war, with eyes also on the upcoming US midterm elections.
Investor fears about the vast sums being invested in the artificial intelligence complex have cast a pall over trading floors in the second half of the year, with many questioning firms’ profitability.
Earnings reports from titans including Amazon, Alphabet, Meta and Microsoft have shown they will keep pouring hundreds of billions of dollars into data centres and chips even as investors grow impatient for returns.
Monday saw Apple post forecast-topping sales and profits but warned that its gross margin — the percentage of sales left after output costs — would drop in October-December.
Earlier, leading AI firm Anthropic posted a more than 1,100 percent surge in quarterly revenue and nearly $900 billion in spending commitments as it counts down to its Wall Street listing later this month.
The investment pledges come amid a surge in borrowing costs, which have raised concerns about some companies’ financial positions owing to their huge debts, adding downward pressure to stock prices.
After a tough run last week, the selling continued at the start of this week with losses in Asian giants followed by their US counterparts on Wall Street where the Nasdaq ended 1.1 percent off.
And there was not much improvement Tuesday — Seoul-listed SK hynix and Samsung tanked around four percent, dragging the Kospi down more than two percent.
There were also losses in Taipei, Shanghai, Sydney, Singapore and Wellington, though Hong Kong, Manila and Jakarta edged up. Tokyo was closed for a holiday.
Even a more than seven percent plunge in oil prices Monday was unable to provide support.
The “collapse in crude should have been rocket fuel for the battered growth trade”, said SPI Asset Management’s Stephen Innes.
“Cheaper energy takes heat out of inflation, eases the rates pressure and normally gives long-duration tech a meaningful updraft.
“Instead, the Nasdaq handed back the entire opening bounce and broke Friday’s lows, a fairly ugly sign that the selling is now being driven by something deeper than oil, yields or the dollar.”
Crude extended the losses in early Asian trade as the US and Iran sounded notes of optimism.
US President Donald Trump on Monday signalled progress in talks as Tehran said “intensive” exchanges were underway while offering to reopen the Strait of Hormuz under strict conditions.
