Asian markets were mixed on Thursday as investors tried to assess the prospects for the AI-driven global rebound, Federal Reserve interest rates and the ongoing US government shutdown.
The news that Israel and Hamas had agreed to the first phase of a ceasefire in Gaza provided some relief to geopolitical concerns (and weighed on oil prices), while gold retreated on the day after hitting an all-time high of more than $4,000.
Technology companies have reached higher and higher levels this year, dragging stock markets with them as companies pump hundreds of billions of dollars into all things AI.
But there are growing concerns that returns are not matching investment sums, leading to warnings that valuations may have gone too far.
“AI is clearly a bubble,” warned Neil Wilson of Saxo Markets. “The question is when, not if, it will explode. And the timing is incredibly difficult,” he added.
“(Software giant) Oracle attempted to burst the bubble yesterday by revealing that margins on its AI cloud business, including leasing servers using Nvidia chips, are razor thin.
“Tesla added to the gravity…as it fell 4.5 percent on (its) lower-priced Model 3/Y, revealing that analysts disappointed. Third-quarter earnings will still be strong, but doubts are being sown for later.”
But while Oracle’s report dragged down Wall Street on Tuesday, the S&P 500 and Nasdaq recovered the next day to close at new records.
And Asia struggled to extend gains, with Tokyo rallying more than 1 percent on continued optimism about more stimulus following the election of business-friendly Sanae Takaichi as leader of Japan’s ruling party.
Shanghai advanced after reopening after a week of vacation, while Sydney, Taipei and Manila also rose.
Hong Kong fell along with Singapore, Wellington and Jakarta.
The US shutdown didn’t help, as Republicans and Democrats are no closer to reaching an agreement to reopen the government as the dispute enters its second week.
Democrats voted for the sixth time to block a Republican stopgap funding measure to reopen government departments — refusing to back any funding bill that doesn’t offer an extension of expiring health care subsidies for 24 million people.
Minutes from the Fed’s last rate meeting showed divisions among decision makers on its cut, with some agreeing only after being persuaded in a discussion about rising prices and a series of weak jobs numbers.
“Policymakers who are increasingly concerned about downside risks to jobs are likely to favor additional, faster rate cuts going forward,” said HSBC’s Ryan Wang.