Asian Shares Slide as AI Spending Worries Mount Ahead of Tech Earnings

AI’s Spending Boom Faces a Harder Earnings Test

Investors are weighing the scale of AI investment against the cash flows and earnings growth needed to justify it.

AI investment is colliding with questions about returns

Shares across Asia slipped as concern grew over the sustainability of the artificial-intelligence investment boom. The issue is not simply whether companies will keep spending, but whether the scale of that spending can translate into durable earnings and cash flow. Worries about negative cash flow and heavy capital expenditure have also pushed up the cost of insuring against corporate defaults, adding to unease around technology-sector risk.

Goldman Sachs analysts expect hyperscaler capital expenditure to nearly double to $800 billion this year and rise further to $1.2 trillion in 2027. Yet the same analysis points to a possible slowdown in the growth rate of AI spending. That distinction matters: expenditure can continue to climb even as its pace of increase cools, potentially making investors more selective about which businesses can demonstrate returns from their investments.

The earnings outlook also looks less uniformly strong. S&P 500 earnings per share growth is expected to be nearly 30% in 2026, before slowing to 18% the following year. Those projections still indicate growth, but a deceleration can make richly valued growth expectations harder to sustain if results or guidance disappoint.

Tech results arrive after a sharp Nasdaq retreat

The near-29% fall in Intel on Friday has raised the stakes for upcoming results from Apple, AMD and Palantir. Their reports may help investors judge whether demand and earnings prospects can keep pace with the sector’s investment plans. The results will be watched against a backdrop in which the Nasdaq lost almost 7% in October, its worst monthly performance since the tariff-related sell-off of April 2025.

Asian benchmarks reflected the cautious mood: Japan’s Nikkei fell 0.5%, South Korea’s market lost 0.8% after a 16% decline last month, and MSCI’s broad Asia-Pacific index excluding Japan eased 0.4%. US futures, by contrast, edged higher, with S&P 500 futures up 0.4% and Nasdaq futures 0.6%. The divergence suggests investors are not treating the pullback as a settled verdict on technology, but are looking for earnings evidence before committing to a direction.

Political uncertainty adds another consideration: a possible Democratic win in either or both chambers of the US Congress could create further hurdles for data centres. For investors, that raises questions about the pace and ease of infrastructure expansion, though the precise policy implications remain uncertain.

Rate expectations and oil complicate the risk picture

A retreat in equities has offered some relief to government bonds, but markets are still pricing in a 72% chance of a quarter-point Federal Reserve rate increase in December. The expected total tightening has fallen to 55 basis points from more than 70 basis points a month earlier. Ten-year US Treasury yields were at 4.952%, below their October peak of 5.3645%, while two-year yields stood at 4.612%.

That makes the week’s central-bank meetings and US data particularly relevant. Markets are wagering on rate increases from the Reserve Bank of Australia, Bank of England and Riksbank, while expecting Norway’s Norges Bank to hold. The US manufacturing survey and payrolls report could also influence expectations: the median forecast is for 65,000 jobs to be added after September’s 29,000 gain, with unemployment holding at 4.2%.

Oil remains a source of pressure on the broader market mood. Brent slipped 1.5% to $111.72 a barrel and US crude fell 1.7% to $102.37, following October gains of 13.6% in Brent. High oil prices may limit the appeal of bonds as a haven, while gold’s 0.6% rebound to $3,898 an ounce followed a 6.8% monthly decline. The account of stressed investors selling gold to meet margin calls points to the possibility that market stress can prompt selling even in traditionally defensive assets.

Key Highlights

• Asian shares fell as investors reassessed the scale and sustainability of AI-related capital spending.
• Hyperscaler capex is forecast to reach $800 billion this year and $1.2 trillion in 2027, while its growth rate may be peaking.
• Apple, AMD and Palantir results follow Intel’s near-29% drop and a roughly 7% monthly decline in the Nasdaq.
• Markets still price a 72% chance of a quarter-point Fed hike in December, despite reduced expectations for total tightening.
• Oil remained above $100 a barrel, while gold’s modest rebound followed a steep monthly fall.

Investor Note: The key test for technology shares is whether upcoming results and outlooks support the enormous AI investment plans. Investors may also want to track rate expectations, oil prices and economic data, as each could shape the appetite for risk across global markets.