Asian Stocks Decline Amid Tech Sector Worries, Bitcoin Falls

Asian stock markets started the week lower as concerns grew about the financial outlook for technology companies and their extensive investments in artificial intelligence. These factors dampened overall investor confidence.

MSCI's index of Asian shares decreased by 0.4%, with South Korea's market, often seen as a leader in AI investment, experiencing a decline of over 2%. In the United States, equity-index futures showed minor fluctuations following a Friday selloff on Wall Street that was led by technology stocks. Bitcoin continued its recent downward trend, slipping to around $88,000 after falling for six of the previous seven weeks.

Investor apprehension has been rising due to doubts about whether tech stocks, which have driven global benchmarks to record levels, can justify their high valuations and significant AI expenditures. Asian markets, which have performed strongly this year, appear particularly vulnerable because of the region's dependence on manufacturing components for the tech industry.

Nick Twidale, chief market analyst at AT Global Markets, noted the potential for an AI bubble to burst soon, highlighting the strong growth Asian markets have experienced due to AI and technology, despite trade concerns. He anticipates a pullback in trading.

Recent events, such as the decline in Nvidia's stock, Oracle's drop after reporting increased AI spending, and negative sentiment surrounding companies linked to OpenAI, indicate growing skepticism. Investors are now debating whether to reduce AI exposure to avoid a potential bubble or to increase investments to capitalize on the technology's transformative potential in 2026.

The uncertainty surrounding AI stems from questions about its practical applications, the high costs of development, and whether consumers will ultimately pay for these services. The answers to these questions will significantly impact the stock market's future.

Elsewhere, Treasury yields stabilized as debate continued regarding the extent of policy easing by the Federal Reserve next year. Cleveland Fed President Beth Hammack expressed her preference for slightly more restrictive interest rates to maintain pressure on inflation. Chicago Fed President Austan Goolsbee, however, projected more interest-rate cuts for 2026 than many of his colleagues anticipate.

Gold prices remained steady after four days of gains, as conflicting statements from Fed officials led traders to reduce bets on further monetary easing in the US next year. The dollar's value remained relatively stable against other major currencies after President Trump suggested the new Fed chair would favor lower rates. Last week, the dollar experienced its longest period of weekly losses since August as expectations grew for two Fed rate cuts in 2026, which is one more than the central bank has indicated.

This week, key economic data from China, including retail sales and industrial production figures, will be closely monitored. Bloomberg Economics anticipates these reports will likely show a slowdown in the Chinese economy in November, with weaker consumption growth and a larger decline in investment.

The Bank of England and the Bank of Japan are among the major central banks scheduled to hold policy meetings this week. A significant amount of global data, including growth figures from New Zealand, European activity data, and inflation data from Canada and the UK, is also expected, which will help assess the direction of monetary policy in 2026.

Kyle Rodda, a senior analyst at Capital.com, commented that fresh AI valuation fears are preventing a "Santa Rally." He added that while the stakes may not be as high as the previous week, there is enough event risk to keep investors alert, potentially triggering a Santa rally or a deeper sell-off.