Asian stocks sank Thursday after a disappointing forecast by chip giant Broadcom stoked concerns about the AI trade, while stronger-than-expected US data compounded speculation the Federal Reserve could hike interest rates.
Fresh Iranian attacks and a lack of progress in talks to end the war and reopen the Strait of Hormuz added to the downbeat mood, though oil prices dived on news of a ceasefire between Israel and Lebanon.
Regional equity markets tracked a retreat on Wall Street, where tech firms — the drivers of a global surge to record highs in recent years — took a hit after Broadcom’s estimated chip revenue for the third quarter came in below expectations.
The outlook revived concerns that the eye-watering sums that companies have invested in the AI sector may have been overdone and that valuations are overblown.
Investment giant Ray Dalio warned on Wednesday that the boom — which has seen Nvidia’s capitalisation top $5 trillion — could turn into a bubble that will pop.
“All great technology changes produce bubbles,” he said in an interview with Bloomberg Television.
“Nobody can get it exactly right. You have to either spend a ton of money to capture your market share and don’t worry about whether it’s too much or not, or you don’t spend enough money and you lose your market share.”
After Wall Street’s retreat — also fuelled by profit-taking — stock markets in Asia fell, with tech-rich Tokyo and Seoul — which have led gains this year — among the hardest hit.
There were also losses in Hong Kong, Shanghai, Sydney, Singapore, Mumbai, Wellington and Taipei.
Jakarta tumbled more than three percent to its lowest level since 2021 as the Indonesian rupiah topped 18,000 to the dollar for the first time on worries about the country’s economy.
However, London, Frankfurt and Paris rose.
Meanwhile, US data showed US companies last month added the most jobs since the start of last year, despite rising energy prices. That came before the release of a closely watched non-farm payrolls report at the end of the week.
Speculation is rising that a strong reading on Friday — which would compound the war-fuelled spike in inflation — could put more pressure on the Fed to hike rates.
“For traders… strong growth is no longer the uncomplicated gift it once was,” wrote Stephen Innes at SPI Asset Management.
“The market spent much of the past year trading as though rate cuts were perpetually just around the corner.
“Instead, the combination of resilient employment, firm activity data, and elevated energy prices is increasingly forcing investors to contemplate the opposite outcome.
