Asian stock markets showed a mixed trend on Wednesday as stronger-than-expected US inflation data and growing concerns over a possible sharp interest rate hike next month weighed on investor sentiment, despite renewed optimism surrounding the artificial intelligence (AI) industry.
Technology stocks have begun recovering this week after suffering heavy losses last week amid concerns over Democratic initiatives to tighten regulations on the AI sector. Investors have returned to the market to buy shares at lower prices, while some have come to believe that earlier concerns may have been overstated.
Positive revenue guidance from data centre operator CoreWeave also helped improve market sentiment. The company’s shares had suffered a significant decline last month, but its latest revenue projections have eased some investor concerns.
Many technology companies are relying on debt to finance massive investments in AI infrastructure. As a result, higher borrowing costs could increase financial pressure on these businesses.
Meanwhile, plans by AI company Anthropic to launch an initial public offering (IPO) have generated fresh interest among investors.
The company is reportedly planning to raise up to $64 billion through the IPO. Its stock market debut is being viewed as an important indicator of how long the current investment boom in the AI sector may last.
Documents from the company also showed that its revenue rose to $17 billion in the third quarter of this year.
A Bloomberg report, meanwhile, said OpenAI, the developer of ChatGPT, generated quarterly revenue of $10 billion for the first time during the July-September period.
The increase was driven by growing demand for its software. Revenue rose nearly 50% from the previous quarter and was almost three times higher than in the same period last year.
Chipmaker Nvidia has also drawn attention following sensational reports about an alleged relationship involving its chief executive Jensen Huang and a woman suspected of being a Chinese spy. The reports have put the company under scrutiny by the US Federal Bureau of Investigation (FBI).
Interest rate concerns fuel market uncertainty
“There is no shortage of reasons for market volatility.”
All three major US stock indexes closed lower on Tuesday, ending a two-day rally. The decline also influenced sentiment across Asian markets.
Stock markets in Tokyo, Seoul and Taipei continued to advance, supported by the strong presence of leading AI companies in these markets. Singapore and Jakarta also recorded gains.
In contrast, markets in Hong Kong, Shanghai, Sydney, Wellington and Manila ended lower.
US consumer price index (CPI) data showed that inflation rose 0.4% in October from the previous month, compared with a 0.6% increase in September.
The report showed that although the pace of energy price increases had slowed significantly, food prices had risen rapidly. Prices also increased in several other sectors, including medical services and household furnishings.
Chicago Federal Reserve Bank President Austan Goolsbee told PBS NewsHour that the latest inflation report was once again concerning, with the situation approaching alarming levels.
Hours before the report was released, Federal Reserve Governor Christopher Waller called for swift action to bring inflation under control.
Another Fed official, Dallas Federal Reserve Bank President Lorie Logan, also strongly backed the need for prompt measures to curb inflation.
Chris Weston, an analyst at investment firm Pepperstone, said market participants were now having to consider both the political implications of Democratic electoral successes and the economic realities of investment in AI infrastructure.
He said investors were being forced to reassess technology companies’ future earnings, cash flows and financing conditions.
Oil prices fell on Tuesday amid hopes of an agreement between the United States and Iran to end the war and reopen the strategically important Strait of Hormuz.
However, international oil prices edged higher on Wednesday.
Benchmark Brent crude was trading at around $92 a barrel. Both Brent and US crude prices have fallen by approximately 20% since the beginning of the month.
In corporate news, shares of SoftBank, Japan’s major technology investor, fell by as much as 8% at one point during trading in Tokyo.
The decline came after the company reported a loss of more than $7 billion for the second quarter of its current fiscal year.
