Asian stock markets experienced a significant rally on Thursday, driven by an exceptionally strong earnings report from chipmaking giant Nvidia. The positive results helped temper growing anxieties about a potential artificial intelligence (AI) bubble and overshadowed concerning signals from the US Federal Reserve regarding interest rates.
Nvidia's Blockbuster Report Calms Nerves
Global markets have faced pressure recently from warnings that stock valuations, especially in the technology sector, had become overextended after a record-breaking rally this year. A key concern among investors has been whether the massive investments flowing into AI would generate profits soon, with some experts pointing out that the necessary infrastructure is still under development.
In this climate, Nvidia's latest financial report, released on Wednesday, served as a crucial health check for the AI industry. The company, a leader in the AI revolution, delivered results that surpassed all expectations, citing what it described as "off the charts" demand for its advanced AI chips.
Addressing concerns directly, Nvidia's CEO Jensen Huang told an earnings call, "There's been a lot of talk about an AI bubble. From our vantage point, we see something very different." Following the announcement, shares in Nvidia, which recently became the world's first $5 trillion company, climbed more than five percent in after-hours trading.
Asian Markets Respond with Widespread Gains
The optimism from Nvidia's performance quickly spread across Asian financial hubs, with technology stocks leading the charge. Major players like South Korea's Samsung and SK hynix, Taiwan's TSMC, and Japan's SoftBank all posted strong gains.
Broader market indices also reflected the positive sentiment. Tokyo's Nikkei 225 index briefly surged more than four percent, while markets in Seoul and Taipei jumped over two percent. Significant gains were also recorded in Hong Kong, Shanghai, Sydney, Singapore, Wellington, and Jakarta.
Despite the rally, analysts urged caution. Stephen Innes of SPI Asset Management noted, "Nvidia's latest forecast has, for now, dulled the sharpest edges of the AI-bubble anxiety... But make no mistake: this is still a market balancing on a wire stretched between AI euphoria and debt-filled reality."
Federal Reserve Casts a Shadow on Rate Cut Hopes
The buoyant mood from Nvidia helped counter a more sobering report from the US Federal Reserve. The minutes from the Fed's October policy meeting revealed that officials are growing increasingly worried about persistent inflation and are leaning against an interest rate cut in December.
This development deals a blow to investor expectations, as bets on a series of rate cuts have been a major driver of this year's stock market rally. The minutes stated that "many participants" believed it would be appropriate to keep rates unchanged for the rest of the year.
The shifting outlook prompted traders to sharply scale back their expectations for a December rate cut, with the probability falling to just 28 percent. This pullback in expectations boosted the US dollar, which climbed to 157.47 yen, its highest level since January.
Investors are now looking ahead to key economic data, though the timeline has been disrupted. The release of US jobs data for September was delayed, and the Bureau of Labor Statistics announced it would not publish October figures separately, instead combining them into November's full report on December 16th.
