Asian equities experienced a broad rally on Friday, following a new record close for the Dow Jones Industrial Average, though the performance of artificial intelligence (AI) related stocks presented a mixed picture with some key players advancing while others extended recent losses. U.S. futures showed moderate gains, and oil prices also edged higher, contributing to the positive sentiment.
Across Asia, market indices largely rebounded. South Korea’s Kospi, which had seen a significant decline of nearly 8% on Thursday, recovered some ground, climbing 2.8% to close at 7,863.22. This recovery was notably driven by major technology firms; Samsung Electronics, the nation’s largest company and a prominent computer chip manufacturer, saw its shares gain 7%. Its smaller competitor, SK Hynix, also posted a strong performance, rising 4.9%.
In Tokyo, the Nikkei 225 advanced 0.9%, reaching 69,368.30. While some chip-related stocks like Tokyo Electron slipped 2.5%, memory maker Kioxia demonstrated robust growth, jumping 6.6%. Hong Kong’s Hang Seng index climbed 1.7% to 23,444.45, and mainland China’s Shanghai Composite index added 0.7%, closing at 4,056.81. Australia’s S&P/ASX 200 also picked up 1.3%, settling at 8,834.90. However, not all regional markets participated in the rally, with Taiwan’s Taiex falling 0.6%.
The positive momentum in Asia followed a strong session on Wall Street on Thursday, where the Dow Jones Industrial Average secured another record, gaining 1.1% to reach 52,900.07. Despite this, broader U.S. market indexes remained mixed due to continued pressure on certain computer chip companies, which have been significant beneficiaries of the AI boom. The S&P 500 finished the day virtually unchanged, edging up by less than 0.1% to 7,483.24, even as seven out of every ten stocks within the index recorded gains. In contrast, the Nasdaq composite, heavily weighted with technology stocks, dropped 0.8% to 25,382.67. U.S. markets were scheduled to be closed on Friday for the Independence Day holiday.
The divergence in AI-related stock performance highlighted growing investor scrutiny. While the AI frenzy has propelled many chip companies to unprecedented valuations, concerns are mounting that their stock prices may have become overheated. There are also questions regarding whether the substantial investments in chips and data centers will translate into the anticipated levels of profit and productivity growth. This apprehension led to further drops for several key players.
Memory maker Micron Technology, for instance, erased an early gain to drop 5.5% on Thursday, building on a significant 10.6% plunge from the previous day. Nvidia, a titan in the AI chip sector with a total market value of nearly $4.7 trillion, fell 1.4%, its movements exerting considerable weight on the S&P 500. Lam Research also experienced a sharp decline, sinking 10.2%. These companies were among the heaviest weights on the S&P 500, reflecting their immense size and influence within the market.
Beyond the tech sector, broader economic indicators provided some support. A report indicated that U.S. employers added 57,000 jobs to their payrolls last month. While this figure is positive for the economy, it fell short of economists’ expectations of 100,000 jobs and represented a slowdown from May’s hiring pace. The silver lining in this weaker-than-expected jobs report is its potential to alleviate inflationary pressures. Inflation has been accelerating globally, partly driven by surges in oil prices stemming from the war with Iran. With oil prices now below their pre-war levels, a slowdown in inflation in the coming months could reduce the Federal Reserve’s urgency to implement multiple interest rate hikes this year.
Such a scenario would be welcomed by investors, as lower interest rates typically stimulate economic activity by making borrowing more affordable for U.S. households and businesses. Historically, lower rates also tend to support higher valuations for stocks and other investments. Meanwhile, companies in the cryptocurrency industry also saw strong gains, with the price of Bitcoin rising roughly 2% after having dropped near its lowest level since 2024. Robinhood Markets shares rose 3.8%, and Coinbase Global gained 3.9%.
In the commodities market early Friday, Brent crude, the international benchmark, gained 0.6% to $72.26 a barrel, while U.S. benchmark crude was up 0.5% to $69.05 a barrel. In currency trading, the dollar weakened against the Japanese yen, falling to 161.17 yen from 161.97 yen. The euro, however, strengthened against the dollar, rising to $1.1439 from $1.1431.
The mixed signals from the AI sector, juxtaposed with robust Asian market performance and a nuanced U.S. economic outlook, underscore a complex global investment environment. While the Dow’s record run provides a bullish backdrop, investors are clearly recalibrating expectations for high-growth tech, balancing enthusiasm with a pragmatic assessment of future profitability and the broader macroeconomic landscape.
