Asian Markets Limp Into Weekend As AI Bubble Fears Grow

Asian equities staggered into the weekend on Friday following a mixed week that saw an agreement on a Middle East ceasefire and huge new AI investments play off against the US shutdown and concerns about a tech bubble.

While some markets hit record highs along with gold and bitcoin, talk is growing that valuations among some companies may have run too high, sparking talk of a pullback.

Buying sentiment got another boost this week from news that ChatGPT-maker OpenAI had signed multi-billion-dollar chip deals with South Korean titans Samsung and SK hynix as well as US firm AMD.

The spending added to the hundreds of billions already pumped into the sector as firms look to get ahead on the sphere of artificial intelligence.

That in turn has seen investors flood into the tech sector, sending stock prices rocketing -- with US chip leader Nvidia topping a $4 trillion market capitalisation.

However, there are rumblings that the rally could run out of steam, causing jitters on trading floors.

"Some areas of the market appear overheated," said Keith Lerner at Truist Advisory Services.

Such worries have been part of the reason behind the rally in gold to a record above $4,000 on Wednesday.

Alexandra Symeonidi, corporate credit analyst at William Blair, wrote: "Given the strong rally in tech stocks some market participants started to question the sustainability of the price momentum and were driving parallels with recent bubbles.

"So, while the overall market has been healthy, investors have been adding hedges in what is broadly considered to be a safe haven asset."

Still, Pepperstone's Michael Brown remained upbeat on equities and saw plenty of upside.

"My view remains that dips in the equity complex should still be viewed as buying opportunities, with the 'path of least resistance' continuing to lead higher amid resilient underlying economic growth, robust earnings growth, and a looser Fed policy backdrop," he wrote in a commentary.

Gold has since fallen sharply, helped by profit-taking as well as a breakthrough in Gaza peace talks and a strengthening dollar.

All three main indexes on Wall Street ended in the red, and Asia largely followed suit.

Hong Kong, Tokyo and Shanghai were among the biggest losers, while there were also retreats in Sydney, Singapore, Wellington, Bangkok and Manila. London dropped at the open, though Paris rose with Frankfurt.

Seoul, however, rallied more than one percent thanks to a surge of more than six percent in Samsung on optimism about its AI chips and memory business.

Mumbai and Jakarta were also up.

On currency markets, the yen rose against the dollar after the junior partner in Japan's ruling coalition said it was leaving the alliance with the ruling Liberal Democratic Party.

The move comes days after the LDP elected stimulus-friendly Sanae Takaichi as its new leader, putting her on course to become prime minister.

Komeito chief Tetsuo Saito reportedly told Takaichi that her answers on the LDP's recent slush fund scandal were unsatisfactory. The move will likely make it difficult for the LDP to pass key legislation, including spending.

Tokyo's Nikkei 225 stock surged this week on Takaichi's election, which stoked hopes for more stimulus measures and a push for easier monetary policies from the Bank of Japan. Futures in the index tumbled on Friday.

Adding to the unease across markets is the standoff in Washington that is expected to see a US government shutdown run into a third week, with both sides showing no sign of backing down.

Republican Senate Majority Leader John Thune indicated a weekend session was unlikely, according to news website Semafor. The Senate was due to be in session on Friday, with an eighth vote on the House-passed bill tipped to fail.

Donald Trump repeated threats to slash government programmes popular with Democrats as he berated the party over the shutdown at a cabinet meeting.

"The Democrat shutdown is causing pain and suffering for hardworking Americans, including our military, our air traffic controllers and impoverished mothers, people with young children, people that have to live not the greatest of lives," he said.

Democrats are privately preparing a shutdown lasting several more weeks, CNN reported, if Republicans do not agree to their demands to extend health care subsidies due to expire on December 31.

Tokyo - Nikkei 225: DOWN 1.0 percent at 48,088.80 (close)

Hong Kong - Hang Seng Index: DOWN 1.9 percent at 26,258.76

Shanghai - Composite: DOWN 0.9 percent at 3,897.03 (close)

London - FTSE 100: DOWN 0.1 percent at 9,497.71

Euro/dollar: UP at $1.1560 from $1.1558 on Thursday

Pound/dollar: DOWN at $1.3292 from $1.3294

Dollar/yen: DOWN at 152.60 yen from 153.14 yen

Euro/pound: UP at 87.00 pence from 86.94 pence

West Texas Intermediate: DOWN 0.6 percent at $61.16 per barrel

Brent North Sea Crude: DOWN 0.6 percent at $64.85 per barrel

New York - Dow: DOWN 0.5 percent at 46,358.42 (close)