Asia: Markets limp into weekend as AI bubble fears grow

[HONG KONG] Asian equities staggered into the weekend on Friday (Oct 10) following a mixed week that saw a Middle East ceasefire and huge new AI investments play off against the US shutdown and concerns about a tech bubble.

While some markets hit record highs along with gold and Bitcoin, talk is growing that valuations among some companies may have run too high, sparking talk of a pullback.

Buying sentiment got another boost this week from news that ChatGPT-maker OpenAI had signed multi-billion-dollar chip deals with South Korean titans Samsung and SK hynix, as well as US firm AMD.

The spending added to the hundreds of billions already pumped into the sector as firms look to get ahead on the sphere of artificial intelligence (AI).

That in turn has seen investors flood into the tech sector, sending stock prices rocketing – with US chip leader Nvidia topping a US$4 trillion market capitalisation.

However, there are rumblings that the rally could run out of steam, causing jitters on trading floors.

“Some areas of the market appear overheated,” Keith Lerner at Truist Advisory Services said.

“The extended stretch without a meaningful pullback leaves the market more sensitive to negative surprises.”

Such worries have been part of the reason behind the rally in gold to a record above US$4,000 on Wednesday.

SEE ALSO

Alexandra Symeonidi, corporate credit analyst at William Blair, wrote: “Given the strong rally in tech stocks, some market participants started to question the sustainability of the price momentum and were driving parallels with recent bubbles.

“So, while the overall market has been healthy, investors have been adding hedges in what is broadly considered to be a safe-haven asset.”

Gold has since pulled back, helped by a breakthrough in Gaza peace talks and a strengthening US dollar.

All three main indexes on Wall Street ended in the red, and Asia largely followed suit.

Hong Kong and Tokyo were off around 1 per cent, while Shanghai, Sydney, Singapore, Wellington and Manila were also down.

Seoul, however, rallied more than 1 per cent thanks to a 6 per cent surge in Samsung on optimism about its AI chips and memory business.

Jakarta was also up.

Adding to the unease is the standoff in Washington that is expected to see a US government shutdown run into a third week, with both sides showing no sign of backing down.

Republican Senate Majority Leader John Thune indicated a weekend session was unlikely, according to the new website Semafor. The Senate was due to be in session on Friday, with an eighth vote on the House-passed bill tipped to fail.

US President Donald Trump repeated threats to slash government programmes popular with Democrats as he berated the party over the shutdown at a cabinet meeting.

“The Democrat shutdown is causing pain and suffering for hardworking Americans, including our military, our air traffic controllers and impoverished mothers, people with young children, people that have to live not the greatest of lives,” he said.

Democrats are privately preparing a shutdown lasting several more weeks, CNN reported, if Republicans do not agree to their demands to extend health care subsidies due to expire on Dec 31. AFP