Asia tech blows its own AI bubble

A look at the day ahead in European and global markets

By Wayne Cole, Chief Correspondent, Treasury

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Asian share markets are all in the green following on from the rebound in U.S. stocks, with investors accepting that Wall Street is schizophrenic on AI right now and wild mood swings are inevitable. The dollar is down modestly, Treasury yields a shade higher and oil up 0.6% or so.

 The logo of NVIDIA as seen at its corporate headquarters in Santa Clara, California, in May of 2022. Courtesy NVIDIA/Handout via REUTERS THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. MANDATORY CREDIT

South Korea, Taiwan and Japan are just happy they make the equipment AI runs on, so sky-high capex is all earnings to them. The Kospi is already up almost 5% this week at a fresh record, bringing its gains for 2026 to 44%. Taiwan's gains are 5% and almost 22%, respectively. Eat your heart out, Nasdaq!

The Nikkei is up 15% on the year so far and getting a lot of good press from analysts calling for a re-rating of Japan Inc on better earnings and governance. Deutsche notes Japanese investors hold $2.25 trillion in foreign shares and even a modest shift to domestic stocks would be a potential bonanza for the Nikkei and the yen.

Much now depends on AI-diva Nvidia, which reports later today, and how far it can beat expectations. Going by LSEG data, forecasts are for profits to rise 62% in the quarter to end January, and revenue to jump 68%.

First-quarter revenue guidance is for a rise of about 64% to $72 billion. Nvidia has outpaced sales forecasts for 13 straight quarters, so it's the size of the beat that matters, with $2 billion on both Q4 and Q1 guidance being a bare minimum.

Options imply a share move of +/-4.8% on the results, which would actually be tamer than in the recent past but then its market cap is so much larger. In this case, 4.8% equals $226 billion in value. Nvidia's total market cap of $4.7 trillion tops the annual GDP of Japan or India.

AI was a fleeting topic in President Trump's lengthy State of the Union, as he announced a "rate-payer protection pledge". This, apparently, means major technology companies must build their own power plants for their data centres. How this would work, or be enforced, was not mentioned.

Oil prices seemed to dip slightly when Trump said his "preference" was to settle nuclear issues with Iran "diplomatically", though that is rather belied by the huge U.S. military build-up in the region. Otherwise, markets reacted little, as they usually do with SOTUs.

Graphics are produced by Reuters.

Graphics are produced by Reuters.