Asian chip stocks rebound ahead of Nvidia earnings as AI trade faces key test

Asian technology and semiconductor stocks experienced a rebound on Wednesday as investors anticipated Nvidia's earnings, following a recent sharp drop in the AI sector. The KOSPI in South Korea rose 1.8%, while Japan's Nikkei 225 gained 0.9% and the TOPIX added 0.6%. China's CSI 300 climbed 1.2%, with the Shanghai Composite up 0.8% and Hong Kong's Hang Seng gaining 0.8%. This broader recovery in technology shares is expected ahead of Nvidia's results.

The surge in Asian chip stocks follows a period of intense pressure on the sector due to elevated Treasury yields making technology companies less attractive and profit-taking after an AI-driven rally. Nvidia's results, due on Wednesday, are a critical test of whether the AI trade can regain momentum or if concerns over stretched valuations and AI spending will persist.

Analysts are expecting Nvidia to report around $92 billion in fiscal second-quarter revenue and $2.09 in adjusted EPS, with the upcoming quarter results playing a crucial role in shaping the broader AI trade outlook.

South Korean memory stocks like SK Hynix and Samsung Electronics were among the biggest beneficiaries of Wednesday's rebound, rising 1.9% and 1.8% respectively. Both companies were heavily impacted by last week's semiconductor drop, but have since shown resilience. Their rally has also been fueled by aggressive shareholder-return measures, including SK Hynix's stock buyback and Samsung's plans for a larger dividend payout.

Meanwhile, Japan's chip sector remained mixed, with LARGAN Precision surging nearly 10%, Sony gaining 1.5%, and Taiwan Semiconductor Manufacturing adding 0.2%. In contrast, Kioxia fell 2.2%, TDK slipped 0.4%, and Murata remained unchanged. China's technology stocks exhibited stronger breadth, with SMIC jumping 3.5%, Xiaomi rising 4.3%, Meituan gaining 2.5%, Tencent adding 1.5%, Alibaba climbing 1.8%, and AI-focused companies Cambricon and NAURA also advancing.

Despite this recovery, investors remain vigilant to the risks that triggered the recent sell-off, including higher long-term borrowing costs and political resistance to the rapid expansion of AI data centers.