Global Market Today: Asian stocks fall on AI jitters, oil extends drop

Asian equities dropped as renewed concerns over artificial-intelligence spending fueled another selloff in chipmakers. Crude oil extended its decline.

The MSCI Asia Pacific Index fell 1.2%, with technology shares the biggest losers. The Kospi Index in South Korea dropped 5.6%, while the Nikkei in Japan slid 1.3%. The moves came after a US gauge of semiconductor giants fell 2.2%. SK Hynix Inc. and Samsung Electronics Co. were among the biggest losers in Asia.

The cost of protecting Nvidia Corp.’s debt against default surged amid a round of AI deals worth more than $750 billion. South Korea’s SK Hynix slipped below its US initial public offering price. ASML Holding NV sank on a report that a Chinese state-backed firm is producing certain chipmaking machines that could threaten its sales.


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Elsewhere, US crude dropped below $82 a barrel after global benchmark Brent slumped the most in more than three months on Monday as Washington paused daily strikes against Iran. Bond yields dropped during the US session, with inflation fears easing in the countdown to the Federal Reserve decision.

Alongside geopolitical developments, investors face a packed week of risk events, with policy decisions from the Fed, Bank of Japan and Bank of England as well as earnings from megacap technology companies. Investors are increasingly looking for signs that the biggest spenders on artificial intelligence can justify the billions of dollars they have poured into the technology.

“This is a week with more than its fair share of potential surprises, good and bad,” said Chris Larkin at E*Trade from Morgan Stanley. “Geopolitics and oil prices may be the biggest wild cards, but a bullish response to strong Magnificent Seven earnings isn’t a given, especially if AI spending levels continue to raise eyebrows.”

Chip companies remained in focus during the US session, with the Philadelphia Semiconductor Index dropping for a third consecutive day. Sandisk Corp., Advanced Micro Devices Inc. and Nvidia were among the S&P 500’s biggest decliners.

Microsoft Corp., Meta Platforms Inc., Apple Inc. and Amazon.com Inc. are among the companies reporting this week. In Asia, SK Hynix and Samsung will announce earnings.

“Those companies embody the critical theme weighing on sentiment in the markets right now — excess capital expenditure and spending by AI companies that, investors fear, will eat into returns,” Kyle Rodda, a senior analyst at Capital.com, wrote in a note to clients.

Traders’ attention will be on a slew of earnings later this week, with more than 170 companies in the S&P 500 set to report. Artificial-intelligence spending is in sharp focus after last week’s selloff in shares of Alphabet Inc.

Elsewhere, Treasuries rose Monday as tensions in the Middle East eased and oil fell, with an auction of the shortest-dated notes attracting buyers ahead of this week’s Fed decision. Traders continued to see a roughly one-in-three chance of a rate hike.

Citadel Securities expects the Fed to raise rates this week — a surprise move strengthening Chairman Kevin Warsh’s credibility in the battle with inflation. A quarter-point increase on Wednesday would reinforce Warsh’s repeated pledge to restore price stability while showing policymakers no longer rely on signaling every policy move well in advance, Frank Flight, the firm’s head of macro strategy, wrote in a note.

On the geopolitical front, President Donald Trump said the US and Iran were engaged in diplomatic talks to end their conflict, but warned the two sides would return to fighting if negotiations didn’t yield a deal.

Separately, Iran and Oman are trying to reach an agreement to restart shipping through the Strait of Hormuz, according to people familiar with the matter.

“The only reason they want to meet is because we’ve been hitting them very hard,” Trump told reporters. “There’s a good chance that something could happen. If it doesn’t, we go back to doing what we were doing.”