Asian markets opened the week on a mixed note Tuesday, reflecting a cautious tone across the region despite a fresh wave of AI-driven enthusiasm that lifted Wall Street to near-record levels. While tech optimism continues to dominate global equity sentiment, investors in Asia remain wary of rising valuations, trade tensions, and uneven economic recovery.

Japan’s Nikkei 225 slipped 0.5% to 52,163.84 as traders returned from a national holiday, taking profits after last week’s surge in semiconductor and robotics stocks. South Korea’s Kospi fell 2% to 4,138.88, weighed by declines in memory chipmakers and internet platforms, while Australia’s S&P/ASX 200 lost 0.9% amid weakness in miners and energy producers.

In contrast, Hong Kong’s Hang Seng Index edged up 0.2% to 26,209.39, supported by selective buying in technology and financials, even as the Shanghai Composite slipped 0.2% to 3,969.05. The divergence underscores growing investor hesitation as Asia digests Wall Street’s rally while grappling with its own macroeconomic headwinds.

Wall Street’s AI Frenzy Lifts Global Sentiment

The mixed session in Asia followed a tech-led advance on Wall Street, where AI heavyweights once again fueled gains. The S&P 500 rose 0.2% to 6,851.97, closing in on last week’s record high, while the Nasdaq Composite climbed 0.5% to 23,834.72. The Dow Jones Industrial Average, however, slipped 0.5% or 226 points to 47,336.68 as cyclical and defensive sectors lagged.

Nvidia continued its dominance, rising 2.2% and extending its staggering year-to-date gain to more than 54%. Amazon followed closely, climbing 4% after announcing a $38 billion agreement with OpenAI to host the company’s AI workloads on Amazon Web Services. Shares of Palantir Technologies, up more than 165% this year, added another 3.3% ahead of its quarterly results.

The rally in AI-related names has become the defining theme of 2025’s equity markets, propelling indices higher even as broader participation narrows. According to FactSet, roughly 80% of S&P 500 companies that have reported earnings so far have beaten forecasts, with overall profit growth tracking near 11% year over year. Still, concerns are mounting that valuations in the AI space are beginning to resemble the late-1990s dot-com exuberance.

Asia’s Balancing Act: Optimism Meets Caution

For Asian investors, the question is whether regional markets can sustain momentum amid global uncertainty. While enthusiasm for AI innovation has benefited chipmakers and software developers, macro challenges — from slower Chinese growth to renewed trade frictions — continue to limit broader gains.

A weaker-than-expected report from the U.S. Institute for Supply Management (ISM) added to investor caution. The data showed American manufacturing activity contracted more than forecast, with several respondents citing financial strain from Trump administration tariffs. The figures reinforced concerns about the global supply chain and potential spillover effects on export-oriented Asian economies.

In energy markets, U.S. crude fell 13 cents to $60.92 per barrel, while Brent crude slipped 15 cents to $64.74, offering modest relief to energy-importing countries in Asia. Meanwhile, the U.S. dollar eased to 153.95 yen, reflecting investor appetite for safe-haven currencies amid mixed risk sentiment.

Looking Ahead: Can AI Optimism Offset Economic Headwinds?

The current divergence between Wall Street’s AI exuberance and Asia’s cautious stance highlights a growing disconnect between tech-driven momentum and macroeconomic fundamentals. While investors remain optimistic about the long-term promise of artificial intelligence, concerns over high valuations, global trade friction, and uneven energy dynamics persist.

For Asia’s markets, near-term direction will likely hinge on earnings results from major technology exporters, upcoming economic data from China, and the trajectory of U.S. interest rate expectations.

As global investors rotate around the AI boom, the challenge for Asian equities will be finding balance between innovation-driven optimism and fundamental resilience — a dynamic that could define the next phase of the market cycle.