Key facts
- Asian stocks declined, poised for a second weekly drop due to energy prices, bond market ructions, and AI spending costs.
- Tech stocks fell on Wall Street after a report indicated OpenAI's annualised revenue was $20 billion less than previously signaled.
- Investors are concerned about the cost and availability of capital for AI infrastructure investment.
- Brent crude futures were at $103.70 per barrel amid Middle East war concerns.
- The US 10-year Treasury yield was steady at 5.226%, near a 24-year high.
- France's debt load, budget deficit, and political outlook are under scrutiny.
Asian stocks declined on Friday, heading for a second consecutive weekly loss, as investors grappled with elevated energy prices, bond market volatility, and the substantial capital required for artificial intelligence investments. The MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.16%.
Tech stocks were particularly hard hit, leading Wall Street's main indexes lower overnight. This downturn followed a report indicating that OpenAI's annualised revenue was $20 billion less than the company had previously signaled, dampening sentiment around AI infrastructure and semiconductor companies. Chris Weston, head of research at Pepperstone, noted that investors are becoming more selective about where they want exposure and at what price.
Concerns over the war in the Middle East, which has fanned inflation worries and contributed to higher global interest rates, kept oil prices elevated. Brent crude futures were trading at $103.70 per barrel. President Donald Trump stated that the US would not attack Iran before the November midterm elections, but market participants remained skeptical about progress toward ending the war.
Investors were also assessing a significant wave of fundraising expected from companies like SpaceX, Broadcom, and Oracle to acquire high-end AI chips. In a sign of market caution, Australia's Firmus, a data centre operator backed by Nvidia, shelved its $5 billion initial public offering due to market volatility, opting instead for private fundraising.
A combination of higher energy costs, anticipated central bank interest rate hikes, and rising government debts has fueled a months-long global bond selloff, pushing borrowing costs to multi-decade highs. Charu Chanana, chief investment strategist at Saxo, highlighted that higher long-term yields make AI growth more expensive and capital more selective, putting a focus on company balance sheets and future earnings quality.
France has been particularly scrutinized for its debt load, budget deficit, and political outlook, with analysts at ING noting that French bond spreads are likely to remain volatile ahead of the 2027 presidential elections. US Treasury markets showed some calm following solid auctions this week, with the benchmark 10-year yield steady at 5.226%, though still near a 24-year high. The dollar remained strong, with the euro poised for its fifth consecutive weekly decline.