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July 29, 2026 - 04:44
6 minutes
(Bloomberg) — Asian stocks dropped as investors rotated out of chip shares amid growing skepticism over returns on massive artificial intelligence spending. Oil climbed and Treasuries fell after fighting erupted in the Middle East.South Korea’s equity benchmark slumped over 6%, following a 11% plunge on Tuesday. Shares of chip major SK Hynix Inc. tumbled as much as 10% after a 557% surge in its quarterly profit missed lofty estimates. The broader MSCI Asia Pacific Index was down 0.9%.Brent rose more than 4% to above $88 a barrel, rebounding from its biggest three-day decline since April 2020, after the US military said it intercepted an Iranian “surprise attack” on its troops and struck back at the Islamic Republic. The yield on benchmark 10-year Treasuries climbed one basis point to 4.62%, as traders weighed the potential inflationary impact ahead of the Federal Reserve’s policy decision on Wednesday.The renewed fighting in the Middle East has shifted investors’ focus back to the Strait of Hormuz, with the risk of disruptions to oil flows threatening to fuel inflation just ahead of the Fed rate decision. That adds another layer of uncertainty for investors already rotating out of tech stocks amid growing doubts over whether billions of dollars of artificial-intelligence spending will generate adequate returns.Meanwhile, President Donald Trump welcomed Israeli Prime Minister Benjamin Netanyahu to the White House Tuesday as the US leader sought to avoid renewed bombing in Iran and instead laid the ground for further diplomacy.“We remain cautious of any potential deal that does not concretely settle the Hormuz topic, given disagreements over management of the Strait led to Iranian aggression and an early failure of the prior MOU,” said Ryan McKay, senior commodity strategist at TD Securities.The technology sector remained in focus as SK Hynix earmarked at least $31 billion in capital spending this year, a record amount, to safeguard its lead over Samsung Electronics Co. and ride a multiyear AI boom.AI spending is under intense scrutiny after Alphabet Inc.’s decision last week to raise its forecast to as much as $205 billion this year reignited concerns over fiscal discipline in the race to dominate the technology. Shares of AI bellwethers have dropped even after companies have beaten earnings estimates. Samsung reports Thursday.The Asian declines came after a gauge of chipmakers slipped 4.5% on Wall Street, with the selloff also putting the Nasdaq 100 Index on the brink of a technical correction. The divergence in S&P 500 and Nasdaq 100 moves “reflects rotation” away from chipmakers, First New York portfolio manager Vikram Rai said.The Nasdaq 100 “can’t go up if semiconductors and memory don’t go up,” he added.The moves create a challenging backdrop ahead of earnings from the largest US tech companies. Microsoft Corp. and Meta Platforms Inc. report results on Wednesday, followed by Apple Inc. and Amazon.com Inc. a day later.Elsewhere, traders are also focused on the Fed. The central bank is expected to hold interest rates steady when it concludes its two-day meeting, but market participants are eyeing the possibility of a surprise hike as patience with high inflation wears thin.Fed officials have kept rates on hold this year as they wait for temporary price pressures from tariffs and the war in Iran to wane. Concern is mounting, however, that inflation won’t reach the central bank’s 2% target unless higher rates are used to rein in demand. Following the Fed, the Bank of England will announce its decision on Thursday and the Bank of Japan Friday.Analysts at JPMorgan Chase & Co. said the probability of a rate hike is likely less than the roughly 30% chance currently priced, as “inflation, while elevated, does not appear to at-risk of an upside explosion.” They assign a 50% chance to a “hawkish hold,” as the central bank will want to stay vigilant even though recent energy prices suggest disinflation may be ahead.Corporate Highlights:Nvidia Corp. Chief Executive Officer Jensen Huang defended open-weight artificial intelligence systems as crucial to developing the nascent AI industry, as officials in Washington consider how to respond to a surprise breakthrough from Chinese startup Moonshot. Meta Platforms Inc. and BlackRock Inc. plan to build a 1-gigawatt data center complex in Texas that will cost about $14 billion to develop, adding to a wave of investment in the computing hubs that power AI. Ford Motor Co. posted earnings ahead of Wall Street estimates and raised its outlook for the second time this year on higher prices and strong sales of high-margin sport-utility vehicles. Some of the main moves in markets:StocksS&P 500 futures were little changed as of 11:40 a.m. Tokyo time Japan’s Topix rose 0.1% Australia’s S&P/ASX 200 rose 1.1% Hong Kong’s Hang Seng rose 1.6% The Shanghai Composite fell 0.2% Euro Stoxx 50 futures fell 0.3% CurrenciesThe Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1395 The Japanese yen was little changed at 163.69 per dollar The offshore yuan was little changed at 6.7731 per dollar CryptocurrenciesBitcoin rose 0.3% to $64,017.12 Ether was little changed at $1,915.82 BondsThe yield on 10-year Treasuries advanced one basis point to 4.62% Japan’s 10-year yield declined 1.5 basis points to 2.760% Australia’s 10-year yield declined six basis points to 4.90% CommoditiesWest Texas Intermediate crude rose 3.9% to $82.37 a barrel Spot gold rose 0.2% to $4,036.57 an ounce This story was produced with the assistance of Bloomberg Automation.–With assistance from Youkyung Lee.©2026 Bloomberg L.P.
