BEIJING (dpa-AFX) - Asian stocks retreated on Tuesday, with tech stocks coming under pressure as warnings mounted around the AI trade.
Broadcom and Intel CEOs have flagged capital costs and uncertain returns as potential constraints on AI infrastructure expansion as Chinese artificial intelligence models gain users rapidly.
Last week, billionaire Ray Dalio warned that AI is a 'classic bubble' that is nearing a bursting point.
As the AI hype fades, investors are weighing the outlook for capital spending against rising borrowing costs and elevated valuations.
The IMF warned today of 'elevated' risks faced by the global financial system, with potential perils including an AI-led market downturn and cyber threats that could have 'severe' consequences.
The U.S. dollar retreated from an 18-month high in Asian trade ahead of key U.S. inflation data due later in week, which could influence Federal Reserve expectations.
Gold edged up half a percent to 4,191 an ounce despite hawkish Fed remarks and escalating Middle East tensions, with Saudi Arabia announcing it was continuing to deal with drone and missile attacks after a weekend of confrontation with the Houthi militia in Yemen.
Cleveland Fed President Beth Hammack said on Monday the U.S. central bank should move 'relatively quickly' to a restrictive monetary policy to keep inflation expectations anchored, but stopped short of backing another rate increase this month.
Brent crude prices fell more than 1 percent to $105.35 a barrel, snapping a three-session winning streak as Russia partially lifted its diesel export restrictions, helping ease supply constraints in global fuel markets.
China's Shanghai Composite index reversed early losses to end marginally higher at 3,800.86, led by gains in defensive stocks. Hong Kong's Hang Seng index inched up 0.30 percent to 24,345.22 after a choppy session.
Japanese markets tumbled as AI-related shares followed their U.S. peers lower due to unwinding of the AI infrastructure trade.
The Nikkei average fell 1.82 percent to 67,777.52 as traders returned to their desks after a long weekend. The broader Topix index settled 0.14 percent higher at 4,110.67. Among the prominent decliners, SoftBank Group shares slumped 8.5 percent and Kioxia Holdings fell 13.3 percent.
Seoul stocks nosedived amid a sell-off in chip shares. The Kospi index plummeted 5.46 percent to 6,035.35, pushing the index's 12-month forward price-to-earnings ratio to a record low on a closing basis.
Samsung Electronics plunged 7.4 percent and SK Hynix lost 10.1 percent due to deteriorating sentiment toward semiconductor stocks.
Australian markets recovered from an early slide to end on a flat note. While the benchmark S&P/ASX 200 finished marginally higher at 8,783.90, the broader All Ordinaries index slipped 0.17 percent to 8,921.50. Banks posted strong gains, helping offset the falls in mining and technology shares.
ANZ, Commonwealth Bank of Australia, Westpac and National Australia Bank rose 1-2 percent after the latest minutes of RBA's monetary policy meeting showed the central bank had turned its attention to the fight against inflation.
Across the Tasman, New Zealand's benchmark S&P/NZX-50 index dropped 0.56 percent to 13,749.60, snapping a three-day winning streak.
U.S. stocks ended mixed overnight, with rising oil prices as well as concerns about AI funding and rapid adoption of Chinese frontier AI models keeping investors on edge ahead of a busy week of corporate earnings and inflation data.
Oil prices rose by nearly $2 a barrel after Ukrainian President Volodymyr Zelenskyy accused Russia of continuing to attack Ukraine's energy facilities despite U.S. President Trump's claim of an 'energy ceasefire' between the two countries.
Following another deadly attack on Riyadh's international airport, Trump said he is 'looking at' joining Saudi Arabia's fight against the Houthis.
While the Dow edged up 0.4 percent, the S&P 500 finished marginally lower and the tech-heavy Nasdaq Composite dropped 0.4 percent.
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