Asian shares subdued, bonds swamped by AI debt wave

Asian stocks faltered on Thursday as soaring borrowing costs weighed heavily on equities, particularly in Japan and South Korea. The Nikkei and South Korean indexes both fell by 0.9% and 0.6% respectively. A surge in oil prices compounded the pressure on government bonds, while a strong auction of U.S. 10-year debt lifted yields off their 24-year highs.

Nevertheless, the dollar strengthened, while the euro tumbled to near 17-month lows amid concerns over France's fiscal health, which now threatens Italy and Greece. Major tech firms like SpaceX, Broadcom, and Oracle are reportedly seeking billions in debt to fund AI chip purchases, raising concerns about the growing reliance on credit.

Experts warn this could exacerbate risk for global investors, particularly if profits from AI investments don't materialize as expected. Despite these headwinds, the AI boom could bolster earnings in the semiconductor and memory sectors. However, the increasing debt burden is straining sovereign bond markets, which are being tested by inflation fears, widening budget deficits, and rising interest rates.