Asian stock markets retreated from recent highs Friday, following a decline on Wall Street driven by a sell-off in Nvidia shares, even as broader regional indices maintained substantial gains for February. Japan’s Nikkei 225 briefly crossed the 59,000 mark for the first time, before easing back, while South Korea’s Kospi also saw initial declines.
The MSCI Asia Pacific Index remained relatively stable in early trading, though it has risen more than 6% in February, poised for a third consecutive monthly increase and outpacing both US and European benchmarks this year. The pullback followed a session in which the S&P 500 Index dropped 0.5% and the Nasdaq 100 fell 1.2% on Wednesday, with Nvidia’s 5.5% slump – its largest single-day decline since April of last year – weighing heavily on the technology sector.
The market’s sensitivity to developments surrounding artificial intelligence was underscored by the reaction to Nvidia’s earnings report, which, while exceeding expectations for revenue, net income and future guidance, failed to fully alleviate investor concerns. According to Hardika Singh at Fundstrat Global Advisors, investors have come to anticipate strong performance from Nvidia, but are now focused on the company’s long-term competitive position in a rapidly evolving AI landscape.
“But where it did miss was easing investors’ concerns about its narrowing moat in the evolving world of compute and explaining its gameplan for how it’ll fare in a world of AI disruption that could upend all kinds of businesses from cybersecurity to food delivery to banks,” Singh said.
Despite the recent pullback, Asian equities have generally outperformed their US counterparts, as investors target companies involved in the AI supply chain, viewing the region as a key source of components and manufacturing capabilities. This trend has been described as investors seeking the “picks and shovels” of the AI build-out.
Elsewhere in the region, Japan’s core inflation gauge slowed to its lowest pace in over a year, attributed in part to utility subsidies implemented by Prime Minister Sanae Takaichi. The yen saw a slight strengthening against the dollar. Australian 10-year yields declined five basis points to 4.65%.
Global markets also reacted to developments in the energy sector and geopolitical negotiations. West Texas Intermediate crude oil held steady around $65.25 a barrel, while the US and Iran are scheduled to resume nuclear talks next week following what mediator Oman described as “significant progress” in Switzerland.
After the close of trading in Fresh York, further AI-related news impacted market sentiment. Shares of Block Inc., Jack Dorsey’s payments company, surged more than 20% in after-hours trading following an announcement of a workforce reduction of approximately 4,000 employees, as the company pivots towards AI-driven initiatives. Dell Technologies also saw its share price rise in extended trading after issuing a positive outlook for sales of artificial intelligence servers.
Global asset managers overseeing more than $20 trillion in assets have increased their bullish stance on emerging market equities, currencies, and bonds, according to a recent review by Citigroup Inc. Funds have reportedly added to long positions in markets across Asia, Latin America, Europe, the Middle East, and Africa, contributing to record-breaking rallies in emerging market indices. MSCI’s main emerging equity index is currently trading near record highs.
