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Tech firms diverged Thursday with a mixed bag of results for some of the AI sector’s big beasts tempering the recent spurt of optimism amid growing anxiety about companies’ investment and debt.
Markets enjoyed a healthy run-up in the previous two days as traders welcomed strong reports from South Korean chip titan SK hynix and a highly impressive IPO filing from Claude-creator Anthropic.
That helped steady nerves among investors who have started to question the vast sums pumped into the AI build-out and when they will see returns, with the spike in borrowing costs compounding concerns.
But uncertainty crept back in Asia on Thursday after Samsung Electronics’ 107.4 trillion won ($80.5 billion) third-quarter operating profit fell short of estimates, even as it represented a breathtaking 783 percent year-on-year jump.
The reading was also the first time any tech company had recorded quarterly operating profit of more than 100 trillion won, Samsung said.
That came after Wall Street titan Alphabet reported lower-than-expected profit and a slowdown in its advertising business.
Alphabet dived 10 percent in after-hours trade, while Samsung lost more than five percent in Asian trade — showing that traders have set a high bar for firms’ earnings.
Still, Microsoft posted forecast-topping revenue and profit, fuelled by its Azure cloud computing division, and Oracle issued a healthy revenue forecast.
And Moody’s Ratings warned that the elevated interest rate environment could pose problems.
“With interest rates much higher in many global regions than they were in 2021, refinancing risk will become more visible as loans originated in 2020-22 approach maturity,” it said in its latest Private Credit Quarterly.
“These vintages were underwritten when rates were low and competition was intense, often with higher leverage and more aggressive terms.
“Even in the absence of additional rate hikes, refinancing pressures are likely to challenge weaker borrowers with 2020-22 vintage loans, with not all emerging unscathed.”
Among tech firms in Asia, SK hynix rose more than one percent to build on its strong showing this week, while Japan’s Kioxia and Advantest were also well up, but Tokyo Electron and SoftBank retreated along with Taipei-listed TSMC.
Broader markets fluctuated, with Japan’s Nikkei up along with Sydney, Singapore, Wellington and Manila.
But Seoul sank nearly three percent, with Hong Kong, Shanghai, Taipei and Jakarta also down.
There appeared little major reaction to the Federal Reserve’s widely expected decision to hold interest rates, as it cited the need for more data in the fight against inflation, which has held stubbornly above officials’ two-percent target for five years.
