AI Momentum Fuels Asia's Rally: Tech Stocks Surge Across Region as Currency Pressure Intensifies

The artificial intelligence rally that dominated Wall Street last week has rippled across Asian markets, with equities climbing broadly on Monday as investors maintain their bullish sentiment heading into year-end. The resurgence in semiconductor and technology demand has provided the primary thrust for regional gains, though currency headwinds continue to weigh on sentiment in certain markets.

Tech-Led Surge Sweeps Through Major Markets

Japan’s benchmark Nikkei 225 index delivered a robust performance, jumping 1.8% to reach 50,402.39 points, with semiconductor manufacturers and tech-focused firms capturing the strongest momentum. Tokyo Electron, a chipmaking equipment leader, surged 6.3%, while Advantest climbed 4.5% on increased optimism around AI infrastructure buildout. Beyond pure technology plays, financial institutions and export-dependent sectors also participated in the upswing, suggesting broader market participation rather than narrow AI concentration.

Across the broader region, growth proved more measured but consistent. Hong Kong’s Hang Seng Index ticked up 0.1% following the People’s Bank of China’s decision to maintain its key loan prime rates unchanged. The Shanghai Composite posted a 0.7% gain in response to the same monetary policy decision. South Korea’s Kospi demonstrated stronger conviction, advancing 2.1%, while Taiwan’s Taiex climbed 1.6% and Australia’s S&P/ASX 200 added 0.9%.

Currency Volatility and Policy Response

The Japanese yen’s ongoing weakness has emerged as a key subplot in this week’s market narrative. Despite the Bank of Japan’s Friday rate hike—bringing policy rates to their highest point in thirty years—the yen continued deteriorating, trading near 157.40 per dollar early in Monday’s session. At current levels, this implies approximately 250,000 yen to USD conversion would yield roughly $1,589 dollars, underscoring the significant depreciation pressures the currency faces.

Japanese financial authorities have expressed growing concern about excessive fluctuations. Atsushi Mimura, a senior official from the finance ministry responsible for foreign exchange policy, stated that “regulators will act to curb any excessive fluctuations,” signaling potential intervention if volatility accelerates further. This dynamic presents a mixed picture for Japanese exporters: weaker currency supports competitiveness abroad but raises input costs for imports.

Wall Street’s Strength Sets the Tone

The Asian upswing draws clear inspiration from Wall Street’s Friday performance. The S&P 500 climbed 0.9%, propelled by semiconductor strength with Nvidia surging 3.9% and Broadcom posting a 3.2% gain. The technology-heavy Nasdaq Composite advanced 1.3% to complete the week on a constructive note.

Software and technology stocks captured particular attention when Oracle jumped 6.6% following its announcement of a U.S. joint venture for TikTok operations, partnering with Silver Lake and MGX, each taking 15% stakes in the vehicle. The deal highlighted continued appetite for technology investments despite regulatory scrutiny.

Not all sectors participated equally, however. Homebuilders faced headwinds as housing data painted a picture of softer demand. KB Home declined 8.5% after sales figures revealed a slowdown in residential real estate activity, suggesting some economic softness in consumer-oriented areas despite AI euphoria in the tech sphere.

Consumer Sentiment Sends Mixed Signals

Consumer confidence ticked higher in December, though the improvement proved marginal. The latest readings remain substantially depressed compared to year-ago levels, held back by persistent inflationary pressures, a cooling employment landscape, and unresolved trade tensions.

The Federal Reserve’s December rate cut appears to have provided limited psychological relief to households. Market participants widely anticipate the central bank will hold its policy rate steady at the January meeting, as officials navigate the challenge of inflation remaining stubbornly above the 2% target.

Energy Markets Catch Momentum

Commodity markets reflected the risk-on environment, with crude oil prices rising in sympathy with equity markets. U.S. West Texas crude gained 1.2% to $57.20 per barrel, while Brent crude climbed to $61.17. The euro maintained its level against the dollar without significant directional movement.

Market Perspective: According to Stephen Innes of SPI Asset Management, “Asian equity markets are stepping onto the floor with a constructive bias, taking their cue from Friday’s solid rebound in U.S. stocks and the growing belief that the final stretch of the year still belongs to the bulls.”