ASX to Slip on Open; Tech Stocks Rebound in US Amid Market Uncertainty

As investors await the next market-moving catalyst in Australia, a rebound in tech stocks overnight has sent Wall Street indexes higher. However, this reversal comes with its own set of challenges and doubts. The AI industry’s meteoric rise is now facing scrutiny over whether its prices have shot too high.

The tech stocks rebound in the US has been driven by a small number of AI companies, with Broadcom being one of the strongest performers. But doubts are rising about whether these investments will generate enough productivity and profits to justify the dollars flowing into AI chips and data centres. This volatility is not unique to the AI industry; tech stocks as a whole have seen sharp swings in recent weeks.

The global appetite for AI from investors will face an additional test later this week when SK Hynix, the South Korean maker of computer memory, plans to raise $US28 billion by selling shares on the Nasdaq. This would make it one of the biggest U.S. offerings ever, but its success is far from guaranteed. SK Hynix’s stock in Seoul has already more than tripled this year due to the AI boom.

The AI industry’s dramatic falls have matched its meteoric rise. SpaceX saw its stock swing wildly following its initial public offering (IPO), while TeraWulf climbed 4.9 per cent after it said Anthropic agreed to a 20-year deal to use its data centre in Kentucky. While these companies may have seen short-term gains, they’re not immune to the market’s whims.

In other news, oil prices drifted lower after OPEC+ announced that seven of its members plan to expand oil production by a combined total of 188,000 barrels per day in August. This move tends to weigh on oil prices, which fell 0.2 per cent to $US71.99. Despite this drop, the price of Brent crude remains close to where it was before the United States and Israel attacked Iran in late February.

The market’s mixed signals are reflected in the bond market, where Treasury yields eased a bit. The yield on the 10-year Treasury fell to 4.47 per cent from 4.49 per cent late Thursday. However, this relief may be short-lived, as economists continue to warn about the risks of inflationary pressures.

The ASX is expected to slip on opening, and one question remains: will these investments generate enough productivity and profits to justify the dollars flowing into AI chips and data centres? The market’s uncertainty may be unsettling for investors, but it’s also a reminder that markets are inherently unpredictable. As we move forward, it’s clear that the next big story will come from the unexpected, and volatility can be both a blessing and a curse.