Asian stock markets declined on Monday as growing concerns over artificial intelligence (AI) investment costs weighed on investor sentiment, despite stronger-than-expected Chinese economic data and falling oil prices.
Japan’s Nikkei dropped 1.2% after losing 5.4% last week, while South Korean shares slipped 0.4% following a weekly decline exceeding 14%. Taiwan’s stock market fell 1.4%, and MSCI’s broadest index of Asia-Pacific shares outside Japan declined 0.6%.
Investors remain concerned that massive spending on AI infrastructure may not generate sufficient returns, particularly as rising borrowing costs and widening corporate credit spreads increase financial pressure on technology companies.
AMP economist My Bui warned that infrastructure depreciation and higher financing expenses could undermine profitability and make future AI expansion more challenging.
Meanwhile, China's economy provided some encouragement after third-quarter gross domestic product (GDP) expanded 4.5%, slightly exceeding market expectations. Retail sales increased 1.1%, while industrial production grew 5.5%, matching forecasts.
Chinese blue-chip stocks trimmed losses to 0.2%, while the yuan strengthened to 6.6828 per dollar, its highest level since July 2022.
Oil prices also declined following President Donald Trump's decision to waive certain sanctions on Russia, although he later indicated that a final decision remained pending. Brent crude futures dropped 1.7% to $107.95 per barrel, while US crude fell 0.8% to $100.62.
However, geopolitical uncertainty persisted after Iran reported another tanker striking a mine in the Strait of Hormuz.
Investors shifted toward government bonds, pushing the US 10-year Treasury yield down four basis points to 5.0525%. Lower yields supported Wall Street futures, with S&P 500 futures gaining 0.7% and Nasdaq futures advancing 1.0%.
Attention now turns to major corporate earnings reports from Meta, Tesla, Lam Research, Texas Instruments and Netflix. According to Goldman Sachs, five major AI hyperscalers could increase combined capital expenditure to approximately $1.2 trillion next year.
Technology earnings remain particularly important after the PHLX Semiconductor Index plunged 11.4% last week, extending its longest losing streak since 2008.
European futures also weakened amid political uncertainty in France. EUROSTOXX 50 futures fell 0.3%, while Germany's DAX futures declined 0.2%.
In currency markets, the euro slipped to $1.1232, while the dollar traded near 157.89 yen. Gold gained 0.4% to $4,181 an ounce as falling bond yields strengthened demand for the precious metal.
