(Bloomberg) — Stocks in Asia look set for a positive open after Advanced Micro Devices Inc.’s blockbuster deal with OpenAI helped fuel a rally in chipmakers that sent US shares to all-time highs. The dollar rose, while the yen held its biggest drop in almost five months.
Equity futures indicated gains in Tokyo, Hong Kong and Sydney. The S&P 500 climbed for a seventh session — the longest advance since May — after AMD soared 24% following the deal to build artificial intelligence infrastructure. In Asia, options traders are the least bullish on the yen in more than three years after pro-stimulus lawmaker Sanae Takaichi’s near-certain ascent to become the next prime minister.
Monday’s AMD deal is the latest big-budget data center agreement this year. It follows last month’s announcement that Nvidia was planning to invest as much as $100 billion in OpenAI amid demand for tools like ChatGPT and the computing power needed to make them run.
“Semiconductors are ‘on fire’,” said Louis Navellier at Navellier & Associates. “The AI narrative continues to gain momentum.”
With “animal spirits” surrounding the AI phenomenon getting yet another boost, Matt Maley at Miller Tabak notes it’s no surprise that issues like the US government shutdown are being mostly ignored by traders.
Long-term Treasuries underperformed, joining a similar trend through much of Europe and Asia amid fiscal concerns. Australia’s 10-year yield climbed five basis points early Tuesday.
Gold extended gains in early Asia trading to near $4,000 an ounce. Oil held Monday’s gain after dropping last week, as a modest production increase by OPEC+ over the weekend staved off traders’ fears of a super-sized hike.
Japanese stocks surged on Monday, with the Nikkei 225 Stock Average closing 4.8% higher at a fresh record amid hopes of more fiscal spending amid Takaichi’s win. The yen lost 1.8% against the dollar to past 150 and sank to an all-time low against the euro, while longer-term bonds fell on concern her policies will require more government spending and fan inflation.
In the US, companies are set to enjoy a better-than-expected earnings season as a robust economy and a solid outlook for AI have left estimates looking too low, according to Goldman Sachs Group Inc. strategists led by David Kostin. They also expect the so-called Magnificent Seven group of tech heavyweights to beat expectations.
At Ritholtz Wealth Management, Callie Cox says markets feel “untouchable,” which is why there are so many people talking about valuations.
“Higher valuations aren’t unusual, but earnings need to grab the baton for the rally to continue,” she said. “Ideally, we want to see profits support prices.”
To Anthony Saglimbene at Ameriprise, it’s possible that some level of investment in the AI buildout today may not yield the degree of return investors hope for, and valuations among some of the leaders would likely need to be adjusted downward.
“However, given the size and scale of companies and industries that have yet to tap into AI in a meaningful way, we are less concerned that we are on the cusp of a dot-com bubble just yet,” he said.
Some of the main moves in markets:
Stocks
Hang Seng futures rose 0.6% as of 7:19 a.m. Tokyo time S&P/ASX 200 futures rose 0.1% Nikkei 225 futures rose 0.8% S&P 500 futures were little changed Currencies
The Bloomberg Dollar Spot Index rose 0.3% Cryptocurrencies
Bitcoin was little changed at $125,284.64 Ether rose 0.2% to $4,699.27 Bonds
The yield on 10-year Treasuries advanced three basis points to 4.15% Australia’s 10-year yield climbed five basis points to 4.38% Commodities
Spot gold rose 0.3% to $3,971.98 an ounce West Texas Intermediate crude rose 0.1% to $61.75 a barrel This story was produced with the assistance of Bloomberg Automation.
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