Asian equities struggled for direction on Thursday as investors weighed the lingering impact of an artificial intelligence-driven selloff, mixed signals from the Federal Reserve, and renewed geopolitical tensions in the Middle East. The MSCI Asia-Pacific index excluding Japan hovered near flat, oscillating between gains and losses throughout the session.
Japan's Nikkei 225 rose 1.2%, recovering some ground after recent losses, while South Korea's Kospi slipped 0.6%, heading for a weekly decline of roughly 15%. The divergence highlighted the uneven impact of the tech rout across the region. Nasdaq futures climbed 0.7% in after-hours trading, buoyed by Microsoft's earnings, but the broader chip sector remained fragile.
Samsung's record profit fails to settle AI debate
Samsung Electronics reported record second-quarter revenue of 171.5 trillion won and operating profit of 89.5 trillion won—nearly 19 times the year-ago figure. The company's memory business benefited from higher prices, robust server demand, and stronger sales of high-bandwidth memory used in AI systems. The results offered some relief after a sharp selloff in South Korean equities, but investors remain skeptical about whether extraordinary chip profits can justify the massive planned capacity additions and AI infrastructure spending. Portfolio managers see panic-driven elements in the recent selling but caution that retail margin balances in Korea and Taiwan may need to stabilize before the market finds a durable floor.
Microsoft and Meta highlight cash-flow divide
Microsoft provided evidence that heavy AI expenditure can coexist with strong earnings and cash generation. Quarterly revenue rose 18% to $90 billion, with Azure growth accelerating to 43%. Free cash flow exceeded analysts' estimates, lifting shares in extended trading. Meta, however, delivered the opposite outcome: its second-quarter free cash flow plunged to $784 million from $8.6 billion a year earlier, as spending on data centers and AI infrastructure surged. The contrast has sharpened the market's distinction between companies already monetizing AI at scale and those asking shareholders to tolerate a longer, more expensive build-out. This dynamic has fueled the broader chip selloff as investors reassess valuations.
Fed leaves bond markets in charge
The Federal Reserve held its target rate at 3.5% to 3.75% in a 9-3 vote, with three officials favoring a quarter-point increase. Chair Kevin Warsh reiterated the commitment to price stability but offered little guidance on what would trigger the next move. That ambiguity shifted the adjustment burden to longer-dated bonds. The 30-year Treasury yield touched 5.2273%, its highest since June 2007, while futures assigned about a 60% probability to a September increase.
Brent crude slipped below $90 per barrel after surging more than 7% on Wednesday. Tanker traffic data showed oil was still leaving the Gulf, but continuing strikes mean the geopolitical premium has not disappeared. For Asian equities, the convergence of AI valuation repricing, rising long-term yields, and elevated energy prices leaves little room for calm. Investors are now watching for further earnings reports and economic data to gauge the path ahead.
This article is for informational purposes only and does not constitute financial advice.
