Markets Confront AI Valuation Angst, Mixed Economic Signals and Yen Pressure
Nvidia’s figures fail to calm AI fears. The chip giant posted record third quarter revenue and upbeat guidance but markets still swung sharply. U.S. stocks posted large intraday moves, with the Nasdaq and the Dow each moving more than 1,000 points from peak to trough. Short term, traders are focused on whether intense AI capital spending will trigger earnings and liquidity stress. Over the longer term, concentration in a handful of firms and heavy debt-funded capex raise questions about durable market leadership. Globally, the surge in risk aversion affects the United States, Europe and Asia in different ways, while commodity and FX flows are starting to reflect those shifts compared with earlier rounds of tech exuberance.
U.S. equities, AI spending and the fragile calm
U.S. markets eroded gains on Thursday despite an early rally. The Nasdaq recorded a 4.9 percentage point intraday swing, its largest since April’s tariff-driven volatility. That came after Nvidia (Nasdaq:NVDA) reported a $57 billion third quarter haul and provided rosy forecasts. Instead of calming concern, the numbers underscored three key worries that have taken hold of investor thinking: huge AI capital expenditures, extreme concentration of gains in a few firms and very stretched valuations.
Those themes are feeding an anxiety that AI capex could produce indigestion. Market commentary has highlighted the growing use of debt to finance investments with steep break-even thresholds. If new capacity does not translate quickly into outsized revenue, the strain on margins and corporate balance sheets could be more visible than models anticipated. In this context, records for revenue do not automatically translate into broader investor confidence.
The delayed release of the U.S. jobs report added to the fog. Nonfarm payrolls increased by 119,000, well above consensus, but the unemployment rate rose to 4.4 percent, the highest since October 2021. That combination complicates the Federal Reserve’s reading of the labour market. With the longest-ever U.S. government shutdown still in recent memory, data for the coming weeks may remain messy and will be watched closely for clues about policy direction.
Asia FX and the yen’s safe-haven question
In Asia, the yen hovered near a 10 month low around 157 per dollar on Friday after Prime Minister Sanae Takaichi approved a 21.3 trillion yen stimulus package. The scale of the plan has raised the spectre of foreign exchange intervention and has put renewed attention on the yen’s status as a global safe haven. Commentary suggests that long-standing assumptions about the currency may be under review.
These moves in FX markets have wider implications. A weaker yen and large fiscal stimulus could influence Japanese import costs, trade flows and investment incentives. For regional markets, any sign of active FX management would be monitored by foreign exchange desks and central banks, and could affect liquidity in other Asian currencies.
Energy markets, LNG narratives and risks to volumes
Energy commentary this week returned to competing narratives about the green transition and fossil fuel demand. Coverage at the COP30 climate summit suggested the transition will be bumpier and more fractured than negotiators expected a decade ago. That view coexists with bullish talk about the United States rising to the top of global LNG exporter rankings and the sell of “freedom gas”.
However, there are concrete risks to that narrative. Analysts point out that shipments to Europe could fall if buyers curb gas use. That would leave U.S. exporters exposed to a rapid downturn in volumes unless they can expand market share in Asia. The calculus here matters for shipping, terminal utilisation and project financing decisions that are linked to multi-year demand assumptions.
China’s commodity signals and strategic metals
Asia commodity watchers have flagged several developments in China that matter for global markets. Reports highlighted growing oil stockpiles, a slump in steel output even as iron ore imports rise, and an uptick in fossil-fuel powered electricity generation. Those patterns suggest demand dynamics that are complex rather than uniformly recovering, and they will influence seaborne flows and pricing for crude, iron ore and thermal coal.
In metals markets, a less glamorous corner of the supply chain has come into focus. Aluminium scrap has been described as a strategic commodity because recycling rates and scrap availability feed primary aluminium supply economics. At the same time, rare earth commentary pointed to the unequal distribution of certain heavy elements and how that creates concentration risks within technology supply chains.
Trading session cues and what to watch
For the coming trading session, volume and volatility are likely to be the immediate themes. Equity market direction will hinge on how investors interpret earnings momentum in technology versus the backdrop of high valuations and rising leverage for capex. The labour market picture will remain a key input for interest rate expectations because the recent jobs data offered a mixed signal.
FX desks will be watching yen moves closely, especially any hints of intervention or rhetoric that signals official concern. Commodity traders will track flows tied to China stockpiles and European gas demand for indications of sustained demand weakness. In energy, LNG flow reports and shipping indicators may provide early warning of volume shifts that challenge the narrative of steadily rising U.S. export dominance.
Finally, the debate over the green transition versus immediate energy security will be visible in both prices and headlines. Coverage suggesting the transition will be bumpier underscores the potential for short term volatility in energy and metals. Readers should expect headlines to influence sentiment and intraday flows more readily than longer term physical market balances during episodes of macro stress.
Overall, the session ahead will be driven by sentiment around AI spending, interpretation of labour market data and moves in FX and energy markets. These three clusters explain much of the recent market instability and will remain focal points for traders and risk managers as the week progresses.
