Asia Tech's Muted Rebound Shows AI Doubts Persist: Market Analysis
Read the Portuguese translation →
Author: Bloomberg Television · Watch on YouTube
Video authored by the channel shown, not by IANIA; all rights belong to the creator. Transcript and summary generated automatically; the original-language content is preserved.
Original language: English
Original video: Asia Tech’s Muted Rebound Shows AI Doubts Persist: Market Analysis · Channel: Bloomberg Television · 02:36 · Watch on YouTube
Topics: AI infrastructure and hardware, Markets and economy
Summary
Section titled “Summary”A modest rebound in Asian stocks has not convinced investors that volatility in the AI trade is over. Markets are looking beyond strong AI-related capital spending to questions about how that spending is financed and whether demand extends beyond the capex cycle. After hotter-than-expected US CPI and PPI reports, Federal Reserve Chair Powell’s lack of an overtly hawkish response helped reduce expectations for rate hikes. Indonesian assets fell sharply, while the concentration of emerging-market indexes in Asian markets makes it difficult for investors to avoid exposure to the AI trade.
Key points
Section titled “Key points”- Stocks in Korea, Taiwan, and Japan staged only a muted bounce after a week of heavy selling.
- The rebound did not reassure investors that volatility in the AI trade is over.
- Strong preliminary figures from Samsung and strong numbers from ASML and TSMC support the view that AI-related capex is strong.
- Investors are concerned about how AI spending is financed and about demand beyond the capex cycle.
- Powell did not respond to hot US CPI and PPI figures with an overtly hawkish tone.
- Market expectations for a Fed rate hike in October fell from around 25% to around 15%.
- Indonesian stocks fell about 11%, their worst sell-off since the Asian financial crisis, and the currency was also affected.
- The discussion cited a potential MSCI downgrade of Indonesia from emerging-market status to a separate status.
- With 70% of the EM index in South Korea, Japan, China, and Taiwan, emerging-market investors have limited ways to avoid the AI trade.
Chapters
Section titled “Chapters”| Start | Chapter | Summary |
|---|---|---|
| 00:00 | Asia’s muted rebound and AI volatility | A modest bounce in Asian stocks is not enough to convince investors that volatility in the AI trade has ended. |
| 00:31 | AI spending, financing, and demand | Despite strong company results and capex, investors are focused on financing and demand beyond the capex cycle. |
| 01:01 | Powell and rate-hike expectations | Following hot US inflation reports, Powell’s lack of an overtly hawkish response helped lower expectations for an October rate hike. |
| 02:04 | Indonesian assets and emerging-market exposure | A sharp sell-off in Indonesian assets and the concentration of EM indexes in Asian markets highlight how difficult it is to escape the AI trade. |
Quotes
Section titled “Quotes”I don’t think, you know, a fairly muted bounce today across Korea, Taiwan, and Japan is is going to convince investors — 00:00
What they’re concerned about is the financing component — 00:31
the fact that he didn’t come out as overtly hawkish — 01:32
we saw Indonesian stocks sell off uh just about 11%. — 02:04
it’s difficult to escape the AI trade for sure. — 02:36
Concepts and entities
Section titled “Concepts and entities”AI trade, capex cycle, Samsung, ASML, TSMC, Powell, Federal Reserve, MSCI, CPI, PPI
Full transcript (original language)
Section titled “Full transcript (original language)”00:00 What have we established? I mean, okay, so stocks in Asia bouncing a little bit, futures look a little bit more stable in Europe and the US for today’s session, but what have we established about AI this week, do you think? >> Yeah, I mean, I think Neil put it very well. I mean, after the depth of selling we’ve seen this week, I don’t think, you know, a fairly muted bounce today across Korea, Taiwan, and Japan is is going to convince investors that you know, the volatility that we’ve seen in the AI trade is is is over. And
00:31 and I think Neil alluded to it very well that you know, we’re moving past the point where, you know, the the capex cycle alone is dictating where the AI trade goes. I mean, we had good preliminary numbers from Samsung. We’ve seen good numbers from ASML and TSMC, and but the market knows that the capex spend is really strong. What they’re concerned about is the financing component and and then also, you know, what does exogenous demand look like for AI? What does demand look like outside
01:01 of this sort of circular component of the capex cycle? So, I think that’s what is certainly leading to some of the jitters on the AI trade. >> [snorts] >> David, we just had a hot CPI print, a hot PPI print out of the United States. Should we have expected Chair Powell to talk about that? He didn’t. Can I take anything away from the fact that he didn’t? >> I think that’s exactly it. That I I I think what the market reacted to was
01:32 after hotter than expected CPI and PPI reports, that the fact that he didn’t come out as overtly hawkish, that’s what really dialed back again some of those expectations for for Fed rate hikes, particularly in October, which had already come down quite significantly, coming in around 25% and now we’re down to really kind of 15%. So, I think that’s what really kind of was reflected across risk assets. I I don’t think it was specifically, you know, what he said. You know, in many ways he didn’t say very much at all. And and so I think
02:04 that’s what markets really kind of reacted to. >> David, what’s going on in Indonesia right now? >> Yeah, I mean, it’s it’s it’s been a very difficult year for Indonesian assets uh coming into today. And then of uh we saw Indonesian stocks sell off uh just about 11%. Uh that’s the worst sell off we’ve seen in in that market since the Asian financial crisis. And that of course spilled over to the currency as well. Uh and this is reflected back from uh the MSCI uh coming out and and saying
02:36 that they were looking to potentially downgrade uh the country uh to not just frontier status from EM, but to sort of this separate uh status. So, I think the bigger takeaway is that EM EM investors have very few places to go. You know, 70% of of the EM index is in South Korea, Ja- uh and China, and Taiwan. So, it’s difficult to escape the AI trade for sure.