Nikkei 225, Kospi jolt Asian markets as AI rout and Fed fears collide

Asian stocks were mixed on Thursday as investors assessed the fallout from the AI sell-off, the Federal Reserve’s rate outlook and renewed tensions in the Middle East.

The MSCI Asia-Pacific gauge excluding Japan was little changed after swinging between gains and losses.

South Korea’s Kospi slipped 0.6% and was heading for a roughly 15% weekly decline, while Japan’s Nikkei rose 1.2%.

Nasdaq futures gained 0.7%, helped by Microsoft’s results, but the region’s bruised chip trade remained fragile.

Samsung’s record is not enough to end the AI debate

Samsung Electronics reported record second-quarter revenue of 171.5 trillion won and operating profit of 89.5 trillion won, almost 19 times the level recorded a year earlier.

Its memory business benefited from higher prices, server demand and stronger sales of high-bandwidth memory used in AI systems.

The numbers offered some relief after a historic rout in South Korean equities.

Yet investors remain focused on whether extraordinary chip profits can justify the scale of planned capacity additions and AI infrastructure spending.

Portfolio managers see a panic-driven element in the recent selling, but say retail margin balances in Korea and Taiwan may need to stabilise before the market finds a durable floor.

Microsoft and Meta expose the cash-flow divide

Microsoft gave investors evidence that heavy AI expenditure can coexist with strong earnings and cash generation.

Quarterly revenue rose 18% to $90 billion (approx. R 1,5 trillion), while Azure growth accelerated to 43%. Free cash flow also exceeded analysts’ estimates, helping lift the shares in extended trading.

Meta produced the opposite reaction. Its second-quarter free cash flow fell to $784 million (approx. R 13,4 billion) from $8,6 billion (approx. R 146,4 billion) a year earlier as spending on data centres and AI infrastructure surged.

The contrast has sharpened the market’s distinction between companies already monetising AI at scale and those asking shareholders to tolerate a longer and more expensive build-out.

The Fed leaves the bond market in charge

The Fed held its target rate at 3.5% to 3.75% in a 9-3 vote, with three officials favouring a quarter-point increase.

Chair Kevin Warsh reiterated the commitment to price stability but offered little guidance on what would trigger the next move.

That ambiguity pushed the adjustment into longer-dated bonds.

The 30-year Treasury yield touched 5.2273%, its highest since June 2007, while futures assigned about a 60% probability to a September increase.

Brent slipped below $90 after surging more than 7% on Wednesday. Tanker traffic showed oil was still leaving the Gulf, but continuing strikes mean the geopolitical premium has not disappeared.

For Asian equities, that leaves little room for calm. AI valuations, long-term yields and energy prices are all being repriced at the same time.