Stocks Retreat From Records as AI Euphoria Meets Valuation Jitters – Asia Market Wrap

Global equities pulled back from record highs as investors turned more cautious about stretched valuations and the flood of money pouring into artificial intelligence — raising doubts about the durability of recent market gains.

Asian stocks were on track for their steepest drop in two weeks after the MSCI All-Country World Index and the S&P 500 both slipped from all-time peaks following a seven-day winning streak. US equity futures edged higher, hinting that the pullback could prove short-lived. Meanwhile, gold extended its blistering advance to surpass $4,000 an ounce, amid worries over the US economic outlook and an ongoing government shutdown.

A measure of the US dollar strengthened to its highest level in over a month, while the yen weakened to its lowest point against the greenback since February, as Sanae Takaichi’s surprise victory as the new head of Japan’s ruling Liberal Democratic Party continued to pressure the currency.

The S&P 500 retreated alongside technology shares amid growing unease that the $16 trillion surge from April lows may have overshot fundamentals. Mounting speculation over inflated valuations in the AI sector, and the trillions being funneled into data centers and infrastructure, stoked memories of the dot-com bubble two decades ago.

The market breather followed weeks of exuberance over high-profile AI tie-ups, including partnerships between OpenAI, Nvidia Corp., and Japanese tech titans Hitachi Ltd. and Fujitsu Ltd. Meanwhile, xAI, the artificial intelligence startup backed by Elon Musk, is reportedly expanding its latest fundraising round — now targeting $20 billion, with Nvidia among its investors.

Focus in Asia also turned to the yen, which sank to 152.34 per dollar and hit a record low versus the euro since the currency’s creation in 1999. Traders dialed back expectations for a Bank of Japan rate hike following the victory of the pro-stimulus lawmaker. Data Wednesday showed Japanese wage growth slowing to its weakest pace in three months, with real pay continuing its downward streak.