Asian markets experienced a predominantly downward trend on Friday, driven by growing investor apprehension surrounding artificial intelligence investments. Technology stocks faced significant pressure, while precious metals like gold and silver retreated from their recent record highs. Additionally, oil prices declined as geopolitical tensions between the United States and Iran showed signs of easing.
Market Volatility Influenced by Multiple Factors
The market's fluctuations throughout this week were shaped by various elements, including a weaker US dollar and former President Donald Trump's threats against Iran. Earlier optimism in the tech sector regarding AI, fueled by robust earnings reports from Meta, Samsung, and SK hynix, took a sharp downturn following Microsoft's recent announcement.
Microsoft's AI Spending Plans Spark Investor Worries
Microsoft revealed plans to substantially increase its AI infrastructure spending, which alarmed investors concerned about delayed returns on investment. This development had a profound impact on Microsoft's stock performance.
"Microsoft suffered its worst session since the Covid-era crash, falling 12 percent and accounting for over two-thirds of the S&P 500's decline," stated Rodrigo Catril of National Australia Bank, as quoted by AFP. He emphasized that investors were particularly worried about escalating costs and slower growth in cloud services.
Asian Market Performance Across Regions
Most Asian markets struggled during the trading session. Hong Kong and Shanghai both dropped more than 1%, while Tokyo, Sydney, Singapore, Taipei, and Manila also recorded losses. In contrast, Seoul and Wellington managed to secure some gains. Jakarta continued to face challenges after MSCI raised concerns about ownership issues in the Indonesian market.
Indian Markets Open at Lower Levels
Indian equity markets also opened on a weak note. The Nifty50 index slipped below the 25,300 mark, while the BSE Sensex was down over 500 points. At 9:16 AM, Nifty50 was trading at 25,274.65, reflecting a decline of 144 points or 0.57%. Simultaneously, BSE Sensex stood at 82,056.49, down 510 points or 0.62%.
Precious Metals and Oil Market Movements
Gold prices retreated to approximately $5,200 per ounce after reaching a high of $5,595, while silver dropped to $110 from its peak of over $121. The slight appreciation in the dollar's value contributed to this decline, despite Trump's apparent comfort with a weaker US currency.
Oil markets remained volatile, with prices falling more than 1% after Thursday's 5% surge. This movement occurred as Trump warned Iran about potential strikes while deploying military forces to the region. Nevertheless, persistent fears about possible conflicts in the oil-rich area continue to loom, which could potentially drive up prices and fuel inflation.
Overall Market Sentiment and Caution
The broader market sentiment reflects heightened caution regarding tech valuations and growing concerns about potential market bubbles. Stocks have reached record highs in recent years, largely propelled by growth in the technology sector, leading to increased scrutiny of sustainability and valuation metrics.
