Asian stocks saw a rebound, particularly in AI-related chipmakers, after a period of market volatility driven by concerns over AI valuations and increased competition. This recovery was observed across broad indices, with MSCI's Asia-Pacific index outside Japan climbing 0.8% and Japan's Nikkei gaining 1%, despite both indices still facing monthly declines. South Korea's KOSPI advanced by over 1%, recovering from a sharp 10% drop, with shares of SK Hynix rising 2% even after the chipmaker's quarterly operating profit, while significantly increased, missed elevated market expectations.
The renewed optimism in AI stocks was partly fueled by strong earnings from SK Hynix, which helped to alleviate some fears surrounding the sector. Analysts like Chris Weston of Pepperstone noted that the market is experiencing a rotation rather than outright risk aversion. Investors are now keenly awaiting earnings reports from "Magnificent Seven" members like Microsoft and Meta Platforms, which are expected to provide critical insights into AI spending trends, especially after disappointing cash flow reports from Alphabet and Tesla last week.
Despite the rebound, caution remains, with the Nasdaq 100 futures dropping 0.3% and Alphabet sliding over 3% in extended trading due to higher-than-expected capital spending plans. Mark Malek, CIO of Siebert Financial, emphasized that while AI optimism persists, the focus has shifted to demonstrating returns on invested capital rather than just AI ambitions. However, Josh Gilbert, Etoro APAC & Mideast lead analyst, indicated that increased capital expenditure from hyperscalers signals accelerating AI build-out, benefiting Asian infrastructure providers.
