Asian equity markets closed the week on a shaky note Friday, pressured by growing investor anxiety over a potential “AI bubble” and the deepening US government shutdown. The mixed week saw record highs in some sectors clash with mounting macroeconomic and political risks.
Tech Rally Falters Amid Bubble Fears
Despite hitting record highs this week—including Nvidia briefly topping a $4 trillion market capitalization—the relentless rally in technology stocks, fueled by massive AI investment, is starting to cause jitters.
Buying sentiment had initially soared following news that ChatGPT-maker OpenAI secured multi-billion-dollar chip deals with South Korean giants Samsung and SK hynix, as well as the US firm AMD. However, market analysts are increasingly warning that valuations may have become unsustainable.
- Keith Lerner of Truist Advisory Services noted, “Some areas of the market appear overheated.”
- Alexandra Symeonidi of William Blair pointed out that the strong tech rally has led “some market participants [to] start to question the sustainability of the price momentum and were drawing parallels with recent bubbles.”
This fear drove investors into safety earlier in the week, pushing gold to a record high above the $4,000 mark on Wednesday. While gold has since fallen due to profit-taking, a breakthrough in Gaza peace talks, and a strengthening dollar, the underlying anxiety remains.
Not all analysts are bearish, however. Michael Brown of Pepperstone remains optimistic, writing that “dips in the equity complex should still be viewed as buying opportunities,” citing resilient economic and earnings growth, alongside expectations for looser Federal Reserve policy.
US Shutdown and Japan Political Turmoil Add Pressure
Adding to the global unease is the prolonged political standoff in Washington, with the US government shutdownexpected to continue into a third week.
- Both Republicans and Democrats show little sign of compromise, with Republican Senate Majority Leader John Thune indicating a weekend session is unlikely.
- President Donald Trump publicly berated Democrats, threatening to slash popular government programs as he blamed the party for the “pain and suffering” caused by the shutdown. Democrats are reportedly preparing for the shutdown to last several more weeks.
Meanwhile, political upheaval in Japan rocked that market:
- The yen strengthened against the dollar after the junior partner in Japan’s ruling coalition announced it was leaving the alliance with the Liberal Democratic Party (LDP).
- The move came just days after the LDP elected stimulus-friendly Sanae Takaichi as its new leader. This fracture will likely make it difficult for the LDP to pass key legislation, including spending bills, sparking a tumble in Nikkei 225 futures.
Market Closures Summary
Following a mixed close on Wall Street, Asian indices largely retreated:
- Major Losers: Hong Kong, Tokyo, and Shanghai were among the biggest decliners, alongside retreats in Sydney, Singapore, and Manila.
- Outliers: Seoul rallied over one per cent, primarily due to a surge of more than six per cent in Samsung shares on optimism surrounding its AI chips and memory business. Mumbai and Jakarta also posted gains.
| Market | Index | Change | Close |
| Tokyo | Nikkei 225 | ?1.0% | 48,088.80 |
| Hong Kong | Hang Seng Index | ?1.7% | 26,290.32 |
| Shanghai | Composite | ?0.9% | 3,897.03 |
| London | FTSE 100 | ?0.1% | 9,497.77 |
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