Major technology stocks experienced a powerful rally following upbeat earnings reports from Microsoft and Amazon, reinforcing expectations of robust spending on artificial intelligence infrastructure. Microsoft added nearly $500 billion to its valuation, marking the largest single-day bump for any company in history after reporting its fastest cloud growth in four years. Amazon also saw investor approval for its results, which showed accelerating cloud computing revenue for the fifth consecutive quarter, leading to a boost in its full-year capital expenditure forecast to $220 billion, with most of it allocated to AI.
The enthusiasm from these tech giants' earnings translated into a significant rebound in the South Korean stock market. The benchmark Kospi surged 14%, on track for its largest one-day jump, with SK Hynix experiencing a record rebound and Samsung Electronics soaring. Foreign investors were identified as the main drivers of this rally, amplified by short-covering and rebalancing by leveraged exchange-traded funds. SK Group Chairman Chey Tae-won's disclosure of SK Hynix share purchases also bolstered confidence in the memory chipmaker.
However, not all tech earnings were met with equal optimism. Meta Platforms dropped nearly 8% after reporting a weak sales forecast alongside commitments for almost $700 billion in future spending. Similarly, Alphabet's earlier capital expenditure forecast of $195 billion to $205 billion for 2026, up from a previous $190 billion, led to investor concerns about the payoff of these expenditures. Analysts highlighted that investors are increasingly looking for a clear return on investment for AI spending, rather than just the amount spent.
Despite the recent rebound, analysts caution against assuming the risks surrounding the AI boom have disappeared. While Friday's rally could be a relief or potentially last longer, the combination of heavy leverage and fragile investor confidence could lead to further volatility. The dramatic swings in the South Korean market, described as having "bipolar disorder," underscore its tight connection to the global AI trade and the potential for rapid reversals.
In other market news, Japan intervened in the foreign exchange market, conducting yen-buying, dollar-selling operations in New York on Thursday to prop up the yen, which had slumped to four-decade lows. The intervention, its first in three months, came ahead of the Bank of Japan's policy decision. The Federal Reserve also faced scrutiny, as 30-year Treasury yields rose above 5.2%, a 19-year high, following Chairman Kevin Warsh's statements on inflation without signaling immediate interest rate hikes, leading to concerns about the Fed's capacity to control inflation.
