Asian Markets Plunge as AI Spending Fears and US Inflation Data Weigh on Sentiment
Asian stock markets traded in the red on Friday, mirroring a downward momentum from Wall Street as technology stocks continued to drag down investor confidence. Traders are grappling with mounting concerns over substantial outlays in the artificial intelligence sector, which have sparked doubts about the profitability and timing of returns on these massive investments.
Key Market Movements Across Asia
In Hong Kong, the Hang Seng Index (HSI) fell sharply by 542 points, or 2.01%, to close at 26,489. Meanwhile, mainland China's markets also experienced declines, with the Shanghai Composite shedding 0.68% and the Shenzhen Composite dropping 0.59%. Japan's Nikkei 225 was not spared, falling 503 points, or 0.87%, to 57,136 as of 11:02 am IST. In contrast, South Korea's Kospi bucked the trend, inching higher by 43 points to trade at 5,565.
Underlying Factors Driving the Sell-Off
This pullback follows several calmer days on trading floors, where sentiment had briefly improved after US employment data exceeded expectations. That report offered reassurance that the global economic powerhouse remained on solid footing following recent turbulence across various asset classes. However, the optimism has been overshadowed by growing skepticism about the scale of capital being committed to AI projects.
With hundreds of billions of dollars already allocated and additional spending plans unveiled in recent days, investors are increasingly questioning how quickly these sums might generate meaningful payback and whether profits will materialize at all. The rapid development of new AI-driven systems capable of undertaking essential work in areas such as legal services, sales, and marketing has intensified concerns among companies that fear being left behind, adding to market uncertainty.
Commodities and Global Economic Outlook
In the commodities market, bullion experienced some of the sharpest selling of the week, with gold dipping below $4,900 per ounce and silver sliding to $74. Despite these declines, the moves were less dramatic than the swings seen earlier in the month, which had unsettled market participants.
The next potential catalyst for global markets comes from the United States, where inflation data are scheduled for release later on Friday. Wednesday's strong jobs report has already led many traders to temper bets on a Federal Reserve rate cut at its upcoming meeting. With the economic outlook appearing somewhat firmer than previously feared, a growing consensus is forming that policymakers may instead wait until July before delivering the next reduction in interest rates.
Overall, the combination of AI spending anxieties and anticipation of key economic data has created a cautious environment, prompting investors to reassess their positions and brace for potential volatility ahead.
