Asian stocks fall as AI slowdown fears deepen, oil surge lifts rate risks

Asian stocks experienced a decline on Monday as concerns surrounding the development of advanced artificial intelligence models intensified. Technology shares suffered due to the push among leading AI companies to moderate their progress, while oil prices surged further above the $100 per barrel mark, raising the prospect of tighter monetary policy.

The Nasdaq 100 Futures declined by 1.3%, and S&P 500 Futures dropped by 0.5%, as investors questioned whether the AI spending boom could maintain elevated valuations and earnings expectations. The MSCI Asia Pacific index also fell by approximately 0.5%.

The debate surrounding AI development gained momentum after prominent figures in the industry, including Anthropic CEO Dario Amodei and OpenAI CEO Sam Altman, advocated for a slower pace of development and called for additional safeguards, such as independent third-party evaluations. Musk, meanwhile, expressed agreement with Amodei and Altman's stance.

U.S. President Donald Trump dismissed the growing concerns, emphasizing the ongoing competition among companies, particularly Chinese rivals. The warnings have prompted questions about the potential impact of a slower AI development pace on corporate spending and earnings expectations. This development occurred at the beginning of a crucial week, with monetary policy decisions from the Federal Reserve, Bank of England, and Bank of Japan to be announced in succession.

The decline in Asian stocks was widespread, with notable losses in SK Hynix (-5%), Samsung Electronics (-2.9%), Japan's Kioxia (-6.8%), Murata Manufacturing (-3.8%), and Largan (-10%). SoftBank Group experienced a significant drop of up to 13% in Tokyo after Altman announced that OpenAI would not go public this year. The pressure mounted on AI-linked valuations as a result.

Hong Kong's technology sector also faced pressure despite the broader Hang Seng index rising. Z.AI suffered a 7.5% drop following the Chinese AI developer's $5 billion fundraising through share placement and convertible bonds, with shares priced below their previous close, raising concerns over dilution. The renewed escalation in oil prices, attributed to Saudi Arabia shutting a key pipeline following drone attacks and a postponed Iran-Gulf meeting, pushed oil above $100 per barrel.

This surge complicates the Federal Reserve's outlook, with swap traders now seeing a nearly 90% chance of a rate hike on Wednesday. The rising borrowing costs and renewed inflation risks have prompted investors to reassess the AI trade. Australia's S&P/ASX 200 remained stable at 8,741.40, while FleetPartners shares surged by 12% amid a bidding war for the vehicle-leasing company.

New Zealand's NZX 50 gained 0.4%, while India's markets were closed for a holiday. Regional markets in Singapore and China showed mixed performance.