Asian equities rallied broadly in a risk-on session, with chip-linked stocks in Tokyo and Seoul benefiting most directly from renewed optimism around artificial intelligence demand. Korea's won climbed to its strongest level in nearly two years, while chip stocks drove gains across the region. The session underscores how tightly Asian markets are now tied to the global AI buildout: Japan and South Korea are home to major links in the semiconductor supply chain, spanning chipmaking equipment, foundries, and memory, so sentiment around AI infrastructure spending flows directly into the region's largest listings.

Japanese stocks rose in early trade, extending hopes for AI-related demand alongside signs of US economic strength, with chip-related names leading the advance. SoftBank Group climbed around 6%, Tokyo Electron gained roughly 4.5%, and Lasertec rose about 7%, underscoring how concentrated the rally has been in AI-adjacent semiconductor names. Tokyo Electron and Lasertec are among the world's leading suppliers of semiconductor fabrication equipment, meaning their fortunes track chipmakers' capital expenditure plans, which investors view as a proxy for AI infrastructure investment.

The Nikkei Stock Average advanced around 1.8% to trade near 66,150, tracking the broader chip-led rally rather than any fresh domestic catalyst.

The dollar traded little changed against the yen, hovering around 156, a sign that the yen's recent strength has stabilized somewhat after last week's sharp move tied to Bank of Japan rate hike speculation. USD/JPY's subdued trading on the day suggests the yen move is more a function of last week's BOJ repricing than a fresh catalyst.

The optimism extended beyond Japan. South Korea's Kospi jumped roughly 3%, while the South Korean won strengthened to its firmest level against the US dollar since October 2024, pointing to renewed foreign investor appetite for Korean equities and currency exposure alongside the region's chip rally. Korea's benchmark is heavily weighted toward semiconductor names, so AI demand optimism tends to amplify its moves relative to other regional indexes. The stronger won, combined with the Kospi's gains, suggests fresh foreign inflows into Korean assets, a combination that typically extends to a firmer regional risk backdrop supportive of the Australian dollar, given its sensitivity to Asian growth and commodity demand sentiment.

Investors remain focused on a handful of swing factors that could quickly alter the mood. Crude oil prices, bond yields, and developments in the Middle East continue to sit at the top of the watch list, given how sensitive risk sentiment across the region has been to any escalation in the ongoing Iran conflict or a sharp move in energy markets.

For now, the combination of AI-driven demand optimism and resilient US data appears to be outweighing those risks, but the rally's concentration in a narrow set of chip names leaves it vulnerable to a reversal if sentiment on any of those fronts shifts. With earnings from major AI-linked technology companies and further detail on central bank policy paths ahead, markets will be watching whether the demand signals behind the chip rally are sustained.

Source: Investinglive

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