The AI construction boom boosts Asia-Pacific markets, Korean stocks rise about 4.5% intraday, oil prices climb, and US Treasuries come under pressure

AI capital expenditure expectations are boosting Asian semiconductor stocks, but U.S. tech stocks are under pressure after hours; escalating tensions in the Middle East are pushing oil prices sharply higher, putting the U.S. Treasury market under dual pressure.

Asia-Pacific stock markets mostly strengthened in early Wednesday trading, with South Korea's KOSPI index climbing to touch 7,100 points, up about 4.5% on the day. Regional chip stocks surged collectively on continued expectations of global AI infrastructure investment expansion. Meanwhile, a Houthi attack on a Saudi oil tanker sparked supply concerns, pushing Brent crude close to $97 per barrel at one point; renewed inflationary pressures are weighing on U.S. Treasuries.

Alphabet announced capital expenditure plans far exceeding Wall Street expectations, leading to a drop of more than 3% in after-hours trading, with Tesla and IBM also declining, and Nasdaq 100 futures slipping 0.2%. The outlook for European stock market openings is also weak as the market awaits the European Central Bank’s rate decision later that day.

Siebert Financial Chief Investment Officer Mark Malek wrote in a research report: "Optimism around AI still exists, but the responsibility has clearly shifted to management, and future earnings calls will increasingly focus on return on invested capital, rather than AI vision planning."

• South Korea's KOSPI index climbed to touch 7,100, up about 4.5% on the day. Samsung Electronics and SK Hynix both rose over 3%. Nikkei 225 closed up 0.5% in early trading, and the TOPIX was up 0.4%.
• Nasdaq 100 futures slipped 0.2%, and the outlook for European market openings is also weak.
• The yen was little changed at 163.07 per dollar.
• The U.S. 10-year Treasury yield was little changed at 4.66%.
• Japan’s 10-year yield rose by 3 basis points to 2.765%.
• Spot gold fell 0.2% to $4,121.94 an ounce.
• Brent crude posted a maximum gain of 2.5%, briefly touching about $96.50 per barrel.
• WTI crude rose 1.6% to $88.20 per barrel.

The MSCI Asia Pacific stock index rose by 1%. The Korea Composite Stock Price Index (KOSPI), a bellwether for AI investment, surged 3.7% in a single day; Samsung Electronics and SK Hynix both climbed over 3%, as investors bet these two Korean chip giants will directly benefit from accelerating global AI spending. The Nikkei 225 closed up 0.5% in early trading, and the TOPIX added 0.4%.

Josh Gilbert, Chief Analyst for Asia-Pacific and Middle East at Etoro, said, "The increase in capital expenditures means a large amount of funds will flow into Asia's order books. Investors interpret this as a confirmation that the AI infrastructure build-out is still accelerating, which is positive news for the underlying infrastructure supply chain."

Alphabet recently disclosed that its capital expenditure this year is expected to reach as much as $205 billion, not only surpassing its own previous guidance but also significantly higher than Wall Street’s expectations. Company executives said on the analyst call that the move aims to expand AI computing capacity to meet the continually rising demand.

Alphabet’s earnings report has kicked off this AI-themed earnings season, opening a period of intensive scrutiny on the returns from AI investments. Last week’s tech stock rout pushed chip stocks into a technical bear market, and the financial results of major tech companies to be released over the next two weeks will be a critical test to see if the hundreds of billions spent on AI can translate into corresponding returns.

Looking ahead, the market's attention will turn to Intel’s earnings on Thursday, as well as Microsoft, Meta, and Amazon reporting next week. Investors are especially focused on these companies' latest guidance on capital expenditures.

Siebert Financial Chief Investment Officer Mark Malek wrote in a research report: "Optimism around AI still exists, but the responsibility has clearly shifted to management, and future earnings calls will increasingly focus on return on invested capital, rather than AI vision planning."

In energy markets, Brent crude posted a maximum gain of 2.5%, briefly touching about $96.50 per barrel—its highest level since early June. Iran-backed Houthi forces claimed responsibility for attacking two Saudi Arabian oil tankers in the Red Sea, heightening market concerns about further supply disruptions.

Geopolitical risks are also intensifying. President Trump warned that if Iran continues to attack vessels in the Strait of Hormuz, the U.S. will strike Iran’s bridges and power facilities. Tehran quickly issued a counter-warning. Diplomatic efforts in the Middle East have essentially stalled, and military actions are ongoing with no signs of easing.

Ian Lyngen of BMO Capital Markets said: "As U.S.-Iran tensions escalate, the continued rise in energy prices is putting pressure on the U.S. Treasury market." The U.S. 30-year Treasury yield has remained above 5% for an extended period—a stretch not seen since the financial crisis—reflecting investors’ ongoing concerns over expanding debt and persistent inflation. The 2-year U.S. Treasury yield is currently holding at 4.30%.

The surge in oil prices, combined with rising Middle East tensions, is making it increasingly complex for the market to gauge the Federal Reserve’s policy path. The Fed is scheduled to hold a policy meeting next week, with money markets currently pricing in about a 30% chance of a rate hike and a 70% chance for rates to remain on hold. The U.S. dollar index edged down 0.2%.