Asian Stocks Rise Ahead of Federal Reserve Rate Decision as AI Concerns Subside

HONG KONG (AP) — Asian stocks moved higher on Wednesday in light trading during the Lunar New Year period. This comes after gains in Wall Street, particularly driven by technology stocks, as fears related to the Chinese AI company DeepSeek began to diminish.

Many Asian markets were closed due to the holiday. Investors were turning their attention towards the upcoming Federal Reserve interest rate decision, expected later in the day. Meanwhile, U.S. futures remained stable, and oil prices experienced a slight decline.

In Tokyo, the Nikkei 225 index rebounded from earlier losses, increasing by 0.7% to close at 39,273.49. In Australia, the S&P/ASX 200 also saw a 0.7% rise, reaching 8,455.70. This increase followed the release of Consumer Price Index data from the Australian Bureau of Statistics, which indicated a modest 0.2% rise in inflation for the December 2024 quarter—the smallest inflation increase recorded since June 2020 when values fell due to the COVID-19 pandemic.

India's Sensex rose by 0.5%, while Thailand's SET index faced a slight setback, decreasing by 0.2%.

On Tuesday, tech stocks saw a recovery after suffering losses on Monday amidst skepticism about the ongoing investment frenzy in artificial intelligence.

The S&P 500 rose by 0.9%, closing at 6,067.70, and managed to regain more than half of its earlier losses. The Dow Jones Industrial Average ticked up 0.3% to 44,850.35, while the Nasdaq composite surged 2% to 19,733.59 after previously dropping 3.1% the day before.

Attention was particularly focused on Nvidia, a key player whose chips are integral to the artificial intelligence landscape. Nvidia's stock surged 8.8% after plummeting almost 17% on Monday—the most significant drop since the onset of the COVID-19 crisis.

Other companies associated with AI also showed positive trends. Chip manufacturer Broadcom increased by 2.6%, while Constellation Energy continued its recovery, rising by 1.4% after having fallen nearly 21% on Monday.

Concerns had been sparked by DeepSeek, a company from China, which reported it developed a large language model performing on par with major American counterparts but at a much lower cost. This raised questions about the necessity of the significant spending anticipated for AI chips and electricity.

AI-related stocks have become prominent players on Wall Street due to rising expectations of long-term spending growth. However, some critics argue that stock prices have escalated too quickly.

How much DeepSeek's advancements will impact the AI market remains unclear. While there could be decreased expenditures in areas like data centers, electricity, and chip investments, other sectors could see growth.

James Egelhof, chief U.S. economist at BNP Paribas, commented, "If AI becomes less expensive to use, we think businesses will adopt it more quickly, making a greater investment in AI software. This acceleration in adoption could generate increased software investment that outpaces any slowdown in spending on data centers and hardware."

The week ahead is significant as several major corporations like Apple, Meta Platforms, Microsoft, and Tesla are set to release their profit reports.

A recent report indicating U.S. consumer confidence fell short of economists' expectations made only minor ripples in the bond market. The primary focus is now on the Federal Reserve's decision regarding interest rates, expected to be announced on Wednesday. Anticipation suggests that the Fed will maintain the current federal funds rate, marking the first meeting since September without a rate cut aimed at stimulating the economy.

On Wednesday, benchmark U.S. crude oil decreased by 14 cents to settle at $73.63 a barrel, while Brent crude, the international standard, fell by 18 cents to $76.31.

In currency exchanges, the U.S. dollar weakened against the Japanese yen, moving from 155.53 to 155.09 yen, while the euro adjusted from $1.0432 to $1.0438.

Stocks, Market, AI