Asian stocks are anticipated to fall due to a significant sell-off in US semiconductor shares, driven by growing concerns that the pace of artificial intelligence development might slow. This comes after the Philadelphia Semiconductor Index experienced its largest drop in over two months, tumbling 5.9%, with major players like Nvidia Corp. and Intel Corp. seeing declines. Adding to market jitters, inflation concerns caused the 10-year Treasury yield to briefly exceed 5%, a level not seen since 2023.
Equity-index futures for Japan, South Korea, and Australia all indicated a downward trend. The re-evaluation of the AI sector stems from calls by prominent AI executives, including OpenAI's CEO Sam Altman, for a slowdown in the technology's development, sparking apprehension about corporate spending and earnings expectations within the supply chain. This debate adds to scrutiny regarding the billions invested in AI and whether the soaring infrastructure costs can be justified by future earnings.
Tim Waterer, chief market analyst for KCM Trade, described the situation as a collision of "two unwelcome headwinds": the potential slowdown in AI development and another surge in oil prices following the closure of Saudi Arabia's East-West pipeline. Brent crude approached $110 a barrel, exacerbating inflation fears and contributing to elevated borrowing costs. The 10-year Treasury yield nearing 5% is seen as another "nervous sign for stocks," particularly with a Federal Reserve meeting scheduled later in the week.
Investors are cautious, trying to gauge the extent of the potential slowdown in AI development, although some analysts, like Yugo Tsuboi of Daiwa Securities Co., believe that while the *pace* of development might slow, overall investment in AI will likely not decline. The dollar has strengthened, and Treasuries maintained losses from last week's sell-off, which was triggered by hotter-than-expected US inflation data, reinforcing the likelihood of a Fed rate hike. Gold, a non-yielding asset, slipped 0.2% to about $4,340 an ounce as bets on a Fed rate hike increased.
