Asian equities advanced on Thursday after major U.S. technology companies announced substantial investment plans for artificial intelligence infrastructure, improving the outlook for chipmakers across the region.

Meanwhile, escalating tensions in the Middle East pushed oil prices to a six-week high, reviving concerns about inflation and the direction of monetary policy.

Chipmakers Lead Regional Gains

Earnings from Alphabet and Tesla showed no signs of a slowdown in AI infrastructure spending. Alphabet also raised its capital expenditure plans for the year, increasing expectations that more investment will flow into Asian semiconductor, memory and data infrastructure companies.

South Korea’s KOSPI surged more than 3%, led by SK Hynix and Samsung Electronics. Japan’s Nikkei 225 gained 0.7%, while MSCI’s broadest index of Asia-Pacific shares outside Japan rose about 1% and was on track to gain 3% for the week.

The main question this earnings season is no longer whether AI demand remains strong, but whether the enormous spending involved can generate sufficient profits to justify current valuations.

Higher Oil Prices Revive Inflation Concerns

Brent crude rose 2% to around $96 per barrel after the United States launched a new round of strikes on Iran and Yemen’s Houthis continued targeting oil tankers in the Red Sea.

A simultaneous disruption to the Strait of Hormuz and the Bab el-Mandeb Strait could affect shipping routes responsible for more than a quarter of global oil and gas flows.

Higher oil prices are increasing concerns about economic growth and inflation, while pushing short-term U.S. Treasury yields to their highest level in 17 months.

U.S. Dollar Strengthens as the Yen Remains Weak

The U.S. dollar was supported by safe-haven demand and growing expectations that the Federal Reserve may raise interest rates sooner.

Markets are currently pricing in around 42 basis points of rate increases this year, with a September hike fully reflected in market expectations.

The Japanese yen traded near 163.07 per dollar, close to its weakest level since 1986. Despite repeated warnings from Japanese authorities about possible intervention, the underlying pressure on the currency remains unresolved.

Conclusion

Asian stocks are benefiting from expectations that AI investment will continue expanding, particularly across the semiconductor and technology infrastructure sectors.

However, the rally faces growing risks from higher oil prices, inflation, rising bond yields and the possibility that central banks may need to keep monetary policy restrictive for longer.

Source: Reuters