Asian share markets opened the week lower on Monday as unease over the enormous sums needed to build artificial intelligence infrastructure continued to unsettle technology investors. A decline in oil prices offered some relief to bond markets and US stock futures, which helped limit the damage.
Tech weakness spills across the region
Japan’s Nikkei 225 fell as much as 2% in early trade after dropping 5.4% last week, though it recovered some ground as the session went on. South Korea’s Kospi slid 1.6% early, following a loss of more than 14% last week, its worst weekly drop since the 2008 financial crisis. It later turned higher.
The broadest MSCI index of Asia-Pacific shares outside Japan eased about 0.3%. In Australia, the technology sub-index of the ASX 200 fell around 2.5%, tracking Friday’s slump on the Nasdaq. Chinese shares held up better, with the Shanghai Composite edging higher after stronger-than-expected economic growth data. Hong Kong’s market was closed for a holiday
Where the anxiety comes from
On Friday the Nasdaq Composite fell 2.1% to 26,140, the S&P 500 lost 1.1% to 7,659, and the Dow slipped about 0.3%. Software and semiconductor shares led the decline. Debt-laden AI cloud provider CoreWeave dropped nearly 12% on Friday, and the cost of insuring its debt against default reached record highs. Market pricing implied a default probability above 60% over five years.
My Bui, an economist at fund manager AMP, said investors have long worried that AI revenues will not be large enough to repay the upfront investment. She also noted that the hardware could lose value as it ages and depreciates. Rising government bond yields and wider corporate credit spreads, she added, are making it harder to borrow and refinance.
Oil gives markets a breather
Oil prices fell after President Donald Trump moved to waive some sanctions on Russia, though he later said no final decision had been made. Brent futures dropped 1.6% to about $108 a barrel, and US crude lost 0.7% to around $100.70. Prices remain elevated, and Iran reported that another tanker had struck a mine in the Strait of Hormuz.
Cheaper oil helped bonds. The 10-year US Treasury yield slipped about three basis points to roughly 5.06%, after its largest weekly fall in more than eight months. S&P 500 futures rose 0.5% and Nasdaq futures gained 0.8%, suggesting a steadier start on Wall Street.
Currencies and politics
The euro eased 0.2% to about $1.1212 after rioting across France, moving closer to last week’s 16-month low of $1.1113. Currency traders are also tracking the same concerns about financing costs that have weighed on equities.
A week packed with earnings
The focus now shifts to company results, which could show whether AI spending is paying off. Meta, Netflix, Procter & Gamble, General Motors and GE Aerospace are among those due to report. Netflix reports on Tuesday, a week after announcing layoffs of around 1,000 staff.
Goldman Sachs estimates that five AI hyperscalers will lift their combined capital spending to about $1.2 trillion next year. Investors want evidence that such spending translates into revenue. Overall earnings for S&P 500 companies are still expected to rise about 30%, largely because of the profits of large technology firms.
Why it matters
For months, markets treated AI investment as a one-way bet. The past week has shown how sensitive that story is to financing costs. Rising yields, hot inflation data and doubts about debt-funded projects have combined to make investors more selective.
Strong earnings from the biggest technology names could steady sentiment, while any sign of weaker spending or tighter credit would test it further. Oil and bond yields will also matter, since both feed directly into inflation expectations and interest-rate decisions.
What to watch
- Meta’s capital spending plans
- Netflix’s results on Tuesday
- the next move in oil, given the Russia sanctions question and tensions around the Strait of Hormuz
- how credit markets treat debt-funded AI infrastructure
