Asia's financial markets took a significant hit as fears surrounding the soaring expenses associated with artificial intelligence investments prompted a shift away from tech stocks. Meanwhile, silver prices faced another downturn, impacting those investors who had taken on excessive leverage in their positions.
In a noteworthy report released on Wednesday, Alphabet, the parent company of Google, announced strong sales figures. However, the company also revealed plans for capital expenditures ranging between $175 billion and $185 billion for the year—far exceeding what analysts had anticipated. This news caused considerable volatility in its stock price, which initially dropped by over 6% before stabilizing to a decline of just 0.4% in after-hours trading.
Amid these developments, investors are increasingly moving away from technology giants, opting instead for more defensive stocks like Walmart. This trend is largely driven by growing concerns about potential disruptions to employment due to advancements in AI technology. The recent downturn in the tech sector began following the introduction of a new legal tool related to Anthropic's Claude large language model, which has resulted in a staggering loss of approximately $830 billion in market capitalization since January 28.
The disappointing earnings from Advanced Micro Devices also contributed to the turmoil, with the chip manufacturer seeing its stock plummet by 17% overnight. As a result, MSCI's broadest index for Asia-Pacific shares outside Japan experienced a decline of 1.7%, heavily influenced by a 3.6% drop in South Korea's KOSPI index. Taiwanese shares fell by 1.1%, although sectors like financial services and real estate did manage to perform better than others.
Japan's Nikkei index mirrored these trends, decreasing by 0.7%, while stocks in healthcare, real estate, and utilities showed resilience.
Tony Sycamore, an analyst at IG, commented on the substantial increase in Alphabet's capital expenditure, stating, "That increase was absolutely enormous. At a time when everyone is hyper-sensitive and hyper-nervous about what's going on with software companies, with CAPEX and AI valuations... I would have thought the reaction would be quite negative."
In the U.S., stock futures attempted to rebound early in the Asian trading session but quickly lost steam, with both Nasdaq and S&P 500 futures showing a decrease of 0.1%. In another development, Bitcoin saw a decline of 1.8%, reaching a low of $71,404, marking its lowest point since November 2024.
All eyes are now on Amazon, as investors await its earnings report later today. Additionally, significant attention is directed toward the upcoming policy meetings of the Bank of England and the European Central Bank, where it is widely expected that interest rates will remain unchanged.
In the commodities market, precious metals suffered a setback, ending two days of gains after a dramatic drop last week from record high levels. Silver prices plunged by 15%, settling at $74.60 per ounce, slightly above a recent low of $71.32. Gold also experienced a downturn, falling by 1.8% to $4,863 per ounce.
The Australian dollar, often sensitive to risk, dropped by 0.4% to $0.6969, while the New Zealand dollar fell by 0.3% to $0.5984. The Japanese yen remained steady at 156.82 per dollar, recovering after four days of declines ahead of a general election scheduled for Sunday. Polls suggest a likely victory for Prime Minister Sanae Takaichi, who has been promoting aggressive spending policies, raising concerns about the country's fiscal stability.
In the bond market, the benchmark 10-year Treasury yield decreased by 2 basis points, resting at 4.2595%. Additionally, the release of the U.S. non-farm payrolls report for January has been postponed from its original date on Friday to February 11 due to a recent partial government shutdown.
Oil prices also declined on Thursday, reversing two days of gains, as the U.S. and Iran were set to hold discussions in Oman, despite disagreements regarding the agenda. West Texas Intermediate crude fell by 1.4% to $64.23 per barrel, while Brent crude futures dropped by 1.4% to $68.47 per barrel.
