Tokyo:Tech firms experienced a significant rebound on Monday, recovering some of the losses incurred last week due to concerns over AI regulation. However, market attention remains focused on Nvidia, as the company is embroiled in a probe concerning its CEO, Jensen Huang, over allegations of an affair with a Chinese spy.
According to Bangladesh Sangbad Sangstha, chipmakers and companies associated with the AI boom faced severe setbacks following the US midterms, which saw Democrats secure both houses of Congress. This political shift is viewed as a backlash against President Donald Trump’s policies, including the Iran war and tariffs that have led to rising prices, as well as the expansive data center development across the United States.
The possibility of the new Congress curtailing tech firms' construction activities has raised concerns about potential job losses. This uncertainty adds to existing apprehensions about the profitability timeline for the extensive investments in the tech sector. Despite these challenges, Wall Street saw stabilization at the end of last week, with Asian markets following suit as trading commenced this week.
Markets in Tokyo, Seoul, and Taipei, which are heavily influenced by AI-related tech giants, led the recovery. The Nikkei 225 in Japan surged over three percent, driven by gains in companies like Kioxia, Tokyo Electron, and Advantest. In South Korea, SK hynix and Samsung contributed to a significant rise in the Kospi index, while Taiwan's TSMC saw an almost six percent increase, boosting the Taiex by five percent. Gains were also reported in Hong Kong and Shanghai, although markets in Sydney, Wellington, and Manila experienced slight declines.
Sally Auld from National Australia Bank remarked that investors are closely monitoring whether the current gains represent short-term recoveries or indicate a more sustained trend. Concerns about AI regulation and capital expenditure remain central to recent risk reductions, though tech stock valuations have become more attractive.
Further uncertainty arose with the investigation into Nvidia's CEO, Jensen Huang, who admitted to infidelity, potentially involving foreign espionage. The New York Times previously reported an intelligence conclusion that a Chinese executive linked to a Singapore-based firm, Megaspeed, had been relaying information to Beijing. The executive, Alice Huang, developed a close relationship with the Nvidia CEO.
Nvidia, a leader in AI chip production, plays a crucial role in the global tech landscape, having achieved a market capitalization milestone of $5 trillion last year. The potential implications of Huang's personal issues have raised concerns about Nvidia’s corporate strategy and its impact on stock performance. Technology analyst Dan Ives of Yorkville Ives highlighted potential congressional inquiries and scrutiny over chip sales to China, a contentious issue in Washington.
Investors are also anticipating the release of new US inflation data. Recent job creation figures exceeded expectations, influencing the Federal Reserve’s upcoming decision on interest rate hikes. Markets currently predict an 80 percent likelihood of an increase in rates during the Federal Reserve's December meeting.