Asian technology stocks rebounded, led by strong gains in Japan, South Korea and Taiwan, as investors weighed AI regulation concerns and fresh uncertainty surrounding Nvidia.
Technology stocks rebounded across Asian markets on Monday after suffering heavy losses last week amid concerns about possible US AI regulation and the profitability of the artificial intelligence boom. However, uncertainty surrounding Nvidia and an alleged foreign espionage investigation involving its chief executive, Jensen Huang, continued to weigh on investor sentiment.
Chipmakers and other companies linked to the artificial intelligence boom took a hammering in the days after Tuesday's US midterm elections, in which Democrats swept both houses of Congress in a rebuke to Donald Trump and his Republican Party.
The results suggested voters were angry over the president's war with Iran and tariffs, which have sent prices soaring, as well as a sharp backlash against the massive data centre expansion that has taken place across the country in recent years.
This has led to speculation that the new Congress will seek to rein in technology companies' construction drive, potentially putting thousands of jobs at risk.
The uncertainty comes as traders are already nervous about when the hundreds of billions of dollars invested in the sector will actually generate a profit.
After taking a battering on Thursday, Wall Street enjoyed some stability towards the end of last week, while Asian markets – which had also suffered heavy losses on Friday – largely followed suit at the start of this week.
Tokyo, Seoul and Taipei – markets heavily weighted towards AI-linked technology giants – led the gains.
Japan's Nikkei 225 climbed more than 3% thanks to rallies in Kioxia, Tokyo Electron and Advantest, while SK hynix and Samsung gained around 3% to push South Korea's Kospi sharply higher.
Taiwan's TSMC surged nearly 6%, helping lift the Taiex by 5%.
There were also healthy gains in Hong Kong and Shanghai, although Sydney, Wellington and Manila edged lower.
"Investors will be watching carefully this week to get a sense as to whether these gains are just short-covering, bargain hunting or the beginning of something more sustainable in nature," said Sally Auld of National Australia Bank.
"Fears around AI regulation, the outlook for (capital expenditure) and free cash flow have been the driver of risk reduction in recent weeks and these issues are not likely to be resolved with any conviction in the near term.
"Nonetheless, the valuation of many tech stocks now looks less expensive."
Nvidia faces scrutiny over alleged espionage plot
However, further uncertainty entered the markets following reports that Nvidia's board was launching an investigation into whether Huang had been targeted in a foreign espionage plot, following his admission that he had been unfaithful to his wife.
The New York Times reported last month that US intelligence officials had concluded that a Chinese executive linked to Singapore-based data centre company Megaspeed had been funnelling information to Beijing.
The executive, Alice Huang – also known as Huang Le and no relation to the 63-year-old Taiwanese-born Jensen Huang – developed a close relationship with the Nvidia chief, the Times reported.
Nvidia is a global leader in producing chips used to train and run AI models and is one of the world's most valuable companies. Last year, it became the first company to reach a market capitalisation of $5 trillion.
Jensen Huang is a major figure in the AI revolution and an informal adviser to Trump. The Times reported that his alleged extramarital relationship could have provided insights into the US president's thinking on AI.
Technology analyst Dan Ives, of investment bank Yorkville Ives, said the controversy would at the very least trigger multiple congressional inquiries and "create an overhang on the stock for a myriad of reasons".
"This will add risk to the stock as he is so important to the Nvidia story and strategy globally," Ives added. "This will also increase major scrutiny regarding selling chips to China, which remains a key battleground issue in DC."
Investors will also be watching for fresh US inflation data this week, after figures released on Friday showed that the economy created far more jobs than expected in October.
The figures will be important for the Federal Reserve as it determines whether to raise interest rates at its next meeting in December, with markets pricing in an 80% chance of an increase.