Asian equities rallied Thursday, with South Korea's Kospi jumping more than 3%, as investors focused on Alphabet's aggressive artificial-intelligence infrastructure spending rather than mixed reactions to broader tech earnings. The move pushed MSCI's Asia-Pacific ex-Japan index up roughly 1%, heading for its first weekly gain in three weeks.
Japan's Nikkei 225 also advanced about 1%, while the rally extended across the region despite headwinds from rising oil prices and climbing short-dated US Treasury yields. Brent crude touched $96 a barrel, leaving markets caught between an AI investment boom and a widening energy shock.
Alphabet's Capex Surge Revives Chip Trade
Alphabet raised its 2026 capital-expenditure forecast to between $195 billion and $205 billion, increasing the midpoint by $15 billion as it races to expand data-center and computing capacity. The revision followed a quarter where revenue climbed 24% to $119.8 billion and Google Cloud sales surged 82% to $24.8 billion. For more details, see our coverage on Alphabet Q2 Cloud Revenue Surges 82% to $24.77B, EPS Beats by Wide Margin.
The spending surge unsettled some Alphabet investors because free cash flow turned negative, but it provided a clearer boost for Asian suppliers of memory, foundry services, and semiconductor equipment. South Korea's Kospi was led by SK Hynix and Samsung Electronics, both key beneficiaries of the AI chip demand cycle.
Allspring Global Investments portfolio manager Gary Tan noted that stronger cloud growth validates heavier investment and suggests the hyperscaler spending cycle still has momentum. Tesla offered a more cautious version of the same story: quarterly capital expenditure reached $5.8 billion, pushing free cash flow below zero, while the company maintained plans to spend more than $25 billion this year on AI infrastructure, robotaxis, and robotics.
Oil Shock Challenges Earnings Relief
The equity rebound unfolded against a worsening supply backdrop. Brent rose 2% to $96 and WTI climbed 1.7% to $88.27 after a 12th consecutive night of US strikes on Iran and Houthi attacks on Saudi-linked tankers in the Red Sea. Iran said the Strait of Hormuz was effectively closed without its approval, while the Houthi threat extended disruption to Bab el-Mandeb. A simultaneous interruption would threaten routes used for more than a quarter of global oil and gas shipments.
Macquarie strategist Thierry Wizman said concern about global growth is justified as higher fuel and transport costs threaten consumption and company margins. The conflict is also rebuilding inflation pressure just as investors had begun to expect a gentler policy path.
Yen Weakness Exposes Policy Gap
The yen traded near 163.1 per dollar after touching its weakest level since 1986, keeping traders alert to possible intervention. Reports that Bank of Japan officials may consider faster rate increases offered only brief support. OCBC strategists said intervention or stronger domestic buying by Japanese pension funds could slow the decline, but a lasting recovery would probably require a quicker BOJ tightening cycle.
Markets priced about 42 basis points of Fed increases by year-end, with a September move fully reflected. Asia's chip rally therefore rests on a difficult bargain: earnings and investment must remain strong enough to outweigh oil-driven inflation, higher yields, and mounting pressure on global growth.
For context on the broader AI investment theme, see Dell Stock Jumps 9% as Super Micro's Record Orders Signal Sustained AI Demand and Nvidia Stock Rises 3% as Alphabet Earnings Loom; BofA Highlights Vera CPU Opportunity.
This article is for informational purposes only and does not constitute financial advice.
