(Oct 21) : Asian stocks were set to track US stock futures higher as strong earnings from some of the biggest beneficiaries of the artificial intelligence boom helped revive the tech trade.
Futures for the Nasdaq 100 jumped 1% after SpaceX reported quarterly net income that more than doubled estimates, sending its shares up more than 5% in late trading. Contracts for the S&P 500 rose 0.5% after the underlying benchmark advanced 0.3% on Tuesday. Equity-index futures for Australia, Japan and South Korea all pointed to gains.
Super Micro Computer Inc. also topped expectations, lifting AI-infrastructure shares in extended trading. The company has benefited from surging spending on equipment used to train and run AI models. Meanwhile, Netflix Inc. sank after issuing a disappointing forecast.
Elsewhere, Brent crude settled near US$109. Talks aimed at reaching a deal between the US and Iran are continuing, according to a diplomat involved in the negotiations, who pushed back against reports that an agreement was close. Long-term Treasuries outperformed, weighing on the dollar.
The results offered some reassurance after concerns over AI valuations and financing rattled technology shares last week. Investors now turn to a packed earnings slate for signs that growth can justify the billions being poured into computing infrastructure, with Meta Platforms Inc. due to report Wednesday.
“There are no signs that demand for AI is slowing,” said Angelo Kourkafas at Edward Jones. “We’re seeing healthy skepticism and a maturation of the theme, moving away from an environment where everything AI-related goes up toward a greater focus on quality and the companies with the deepest pockets to finance the investment needed to meet demand.”
Elon Musk’s satellite, rocket and AI conglomerate posted US$4.4 billion in net income for the quarter ended September, compared with analysts’ average estimate of US$1.88 billion. Revenue surged 161% from a year earlier and also beat expectations.
Separately, Musk said SpaceX and Tesla Inc. have formed special committees to explore a potential merger, a preliminary step toward what would rank as the largest corporate tie-up of all time.
Long-term Treasuries advanced Tuesday as oil retreated from recent highs, easing inflation concerns. Yields from 10 to 30 years fell three to four basis points, with the benchmark 10-year rate declining to 5.11%.
While oil prices have been a dominant driver of Treasury yields for much of this year, bond investors largely ignored them last week amid a selloff in stocks that have benefited from investment in artificial intelligence.
“The AI risk-off trade that bubbled up last week is still top of mind in rates markets and seems to be driving the price action today, although the move lower in oil also helped put some downward pressure on yields,” said Izaac Brook, US rates strategist at RBC Capital Markets.
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