Asian markets fluctuated on Tuesday as investors assessed the impact of Wall Street’s latest technology rally amid growing concerns that a speculative bubble may be forming, while mixed messages from US Federal Reserve officials heightened uncertainty over the central bank’s next interest rate move.
A surge of multi-billion-dollar investment into artificial intelligence has driven much of this year’s global stock market growth, propelling technology shares to record highs. The rally has also been bolstered by easing trade tensions since US President Donald Trump’s April tariff shock and expectations that the Federal Reserve will maintain its trend of lowering borrowing costs.
However, many investors fear the market may be overheating, with valuations rising largely on the back of the tech sector. This has fuelled a sense of “fear of missing out”, further pushing up prices, even as warnings grow that a painful correction could be looming.
In one of the latest signs of tech industry exuberance, ChatGPT creator OpenAI finalised a $38 billion deal with Amazon’s AWS cloud division, adding to its existing partnerships with Oracle, Broadcom, AMD and chipmaker Nvidia.
“Even after the tariff-induced dip in April, global equities have gained around $17 trillion in market value, but the rally has become increasingly concentrated among a small cluster of tech giants,” wrote Stephen Innes of SPI Asset Management.
“It’s as if the entire market has narrowed to a single crowded corridor, lined with AI logos and venture dreams. Amazon’s move adds yet another rocket to the booster stack – and traders are cheering the ignition rather than questioning how much fuel is left.”
Wall Street ended Monday’s session mixed, with the tech-heavy Nasdaq and the S&P 500 climbing while the Dow Jones Industrial Average slipped into the red.
In Asia, markets struggled to extend the previous day’s momentum. Hong Kong gained alongside Wellington, Manila and Jakarta, but Tokyo, Sydney, Singapore, Seoul and Taipei all edged lower, while Shanghai closed flat.
Remarks from Federal Reserve officials did little to inspire confidence after Chair Jerome Powell signalled last week that a third rate cut this year – following reductions at each of the previous two meetings – was not guaranteed.
Fed Governor Lisa Cook warned that inflation could remain elevated into next year as the effects of tariffs take hold, noting that many firms were running down inventories before passing increased costs to consumers.
“Looking ahead, policy is not on a predetermined path,” Cook said. “We are at a point where risks to both sides of our dual mandate are elevated,” she added, referring to the Fed’s twin goals of supporting employment and controlling inflation.
“Every meeting, including December’s, is a live meeting.”
Chicago Fed President Austan Goolsbee said his main concern remained inflation, while San Francisco Fed chief Mary Daly indicated she was open to “all options” for December. Governor Stephen Miran, a Trump appointee, meanwhile, expressed support for further cuts.
“The divergence in views underscores Chair Powell’s message that another rate cut in December is far from certain,” wrote Rodrigo Catril of National Australia Bank. “With limited new data available, policymakers are choosing to wait before making a move – much like slowing down when driving in fog.”
Adding to concerns, data released Monday showed continued weakness in the US economy. A key manufacturing index contracted for the eighth consecutive month in October, performing worse than expected as both demand and output declined.