Asian Stocks Drop Amid AI Bubble Concerns and Looming US Government Shutdown

Asian equities ended the week on a cautious note Friday, as optimism over new artificial intelligence investments and a Middle East ceasefire was offset by fears of a US government shutdown and growing talk of an overheated tech sector.

While gold, bitcoin, and some equity markets reached record highs during the week, concerns have mounted that valuations in parts of the technology industry have climbed too fast, fueling warnings of a possible correction.

Investor enthusiasm received a fresh boost after reports that OpenAI, the maker of ChatGPT, had signed multibillion-dollar chip supply deals with South Korean tech giants Samsung and SK hynix, alongside US semiconductor firm AMD.

The announcement added to the wave of massive investments pouring into AI, sending tech stocks soaring and pushing US chip leader Nvidia past a $4 trillion market capitalisation. However, analysts warned that momentum may be cooling.

“Some areas of the market appear overheated,” noted Keith Lerner of Truist Advisory Services, as traders turned cautious heading into the weekend.

Across Asia, Hong Kong, Tokyo, and Shanghai led losses, while markets in Sydney, Singapore, Wellington, Bangkok, and Manila also declined. London slipped slightly, though Paris advanced, and Frankfurt posted gains.

Seoul, meanwhile, rose more than one per cent, driven by a surge of over six per cent in Samsung Electronics shares, buoyed by optimism about its AI chip and memory business. Mumbai and Jakarta also ended the day higher.

In currency markets, the Japanese yen strengthened against the dollar after Japan’s junior coalition partner announced its exit from the ruling alliance with the Liberal Democratic Party (LDP). The move came just days after the LDP elected stimulus-leaning Sanae Takaichi as its new leader, positioning her to become prime minister.

Reports indicated that Komeito leader Tetsuo Saito withdrew support over dissatisfaction with Takaichi’s handling of a recent slush fund scandal — a development that could complicate the LDP’s efforts to pass spending legislation. Tokyo’s Nikkei 225 index, which had surged earlier in the week on stimulus hopes, slipped one per cent by Friday’s close.

Adding to investor unease, the standoff in Washington deepened as the US government shutdown stretched into its third week, with lawmakers showing little sign of compromise. Senate Majority Leader John Thune said a weekend session was unlikely, while a scheduled vote on the House-passed funding bill was expected to fail.

Former President Donald Trump reiterated his criticism of Democrats, accusing them of prolonging the shutdown and threatening cuts to several government programmes. Meanwhile, Democrats were reportedly preparing for a protracted budget impasse that could extend for weeks if no agreement is reached on health care subsidy extensions due by year-end.

Market snapshot (as of 08:10 GMT):

Tokyo (Nikkei 225): ↓ 1.0% at 48,088.80

Hong Kong (Hang Seng): ↓ 1.7% at 26,290.32

Shanghai Composite: ↓ 0.9% at 3,897.03

London (FTSE 100): ↓ 0.1% at 9,497.77

Euro/Dollar: ↑ $1.1577

Pound/Dollar: ↑ $1.3301

Dollar/Yen: ↓ 152.87

Brent Crude: ↓ 0.6% at $64.84 per barrel

WTI Crude: ↓ 0.4% at $61.25 per barrel

Dow Jones: ↓ 0.5% at 46,358.42