Asian stocks fell amid the continued tech sell-off, as the AI-focused enthusiasm is losing steam due to fears surrounding overstretched valuations, increased tech infrastructure funding, and delays in meaningful returns. Japan’s Nikkei 225 closed lower at 49,001.50, shedding 1.03%. Hong Kong’s Hang Seng Index is trading at 25,390.74, 0.31% down at press time. AI poster child NVIDIA Corporation (NVDA) closed lower at 170.94, sliding 6.78 points. The S & P fell by 1.2%, reflecting the broader anxiety over mega tech stocks. Moreover, Asian markets are walking on a tightrope ahead of the Bank of Japan’s (BOJ) rate hike decision.
The Tech Stock Overvaluation Fears Continue to Plague the Market
The tech stock overvaluation fears are weighing down the Asian markets, especially following Oracle’s stock falling by over 50% from its all time high reached in September. Blue Owl Capital has reportedly withdrawn from Oracle’s data center project over concerns about the mounting debt of the U.S. software giant. The project is reportedly valued at over $10 billion.
The chip maker Broadcom Inc.(AVGO) closed lower at 326.02, shedding 4.48%, while Advanced Micro Devices, Inc. (AMD) ended the trading session at 198.11, down by 5.29%.
The broader fall is attributed to escalating anxiety around the AI theme. This year, markets across the globe saw rallies driven mainly by the AI hype. As the year is about to end, the concerns over returns are dominating the market landscape. Despite the growing concerns, not everyone is shying away from betting big on tech. For instance, analysts at Bank of America said that they believe the AI trade may still have room to run into 2026, even as concerns about an expanding AI bubble persist.
Along with mounting pressure from tech overvaluations, Asian markets are treading cautiously due to tightening financial conditions in Japan.
The Markets on a Tightrope as the BOJ is Expected to Raise Interest Rate to a 30 Year High
The BOJ has begun its two-day policy meeting, and analysts are expecting a 30-year high interest rate hike. The ultra-low interest rates in Japan played a major role in keeping the global liquidity in good shape. With a hawkish monetary policy shift, the risk appetite in the market is going down. Investors are moving towards safer assets like government bonds.
In Polymarket, traders are pricing in a 98% probability for a 25 basis point increase. Some analysts are stretching the rate hike predictions even to 0.75%, which would be the highest since 1995. The central bank will announce the decision tomorrow, December 19. Markets across the globe are awaiting the decision, as a hike is likely to have a detrimental effect on investor positioning.
With the rising concerns over a potential AI bubble burst and hawkish monetary policy in Japan, December may be a tough ride for the markets, even spilling over to next year.
