Asian stocks slide as geopolitical risks cloud AI earnings outlook

Asian stock markets contracted sharply on Tuesday as investors grappled with overlapping sources of uncertainty: civil unrest in France, the prospect of shifting US policy toward Russian energy, and the imminent release of earnings from the companies that have driven much of this year's market gains.

The selling was broad. South Korea's KOSPI index fell 3.61%, Japan's Nikkei 225 dropped 1.28%, and the MSCI Asia ex-Japan index retreated 0.93%. The moves reflected a classic pattern of risk-off trading—money flowing toward safer assets as confidence wavered. The dollar held steady, and crude oil prices climbed as traders parsed the implications of an executive order issued by President Trump on Friday that waived certain sanctions and tariffs on Russian energy. Brent crude rose to $109.78 a barrel, while West Texas Intermediate gained to $103.82.

The immediate trigger for the unease was France. Over the weekend, riots and looting had erupted in several cities, including Paris, Lille, and Nice, stemming from anti-government protests. French authorities responded by imposing curfews in parts of multiple cities. The instability rattled European sentiment enough that traders began pricing in what they saw as elevated sovereign risk for France, though the euro itself held relatively steady—strengthening to $1.12 against the dollar—suggesting markets were not yet treating the situation as a systemic threat to the broader eurozone.

But the deeper anxiety was about artificial intelligence and whether the extraordinary investment cycle that has sustained tech stocks would continue. Meta, Tesla, and chipmakers Lam Research and Texas Instruments were all due to report earnings within days. These results mattered enormously. Goldman Sachs had forecast that five major AI infrastructure companies would collectively increase capital expenditure to roughly $1.2 trillion in the coming year. For the technology sector globally, earnings were expected to double compared to the same quarter a year earlier—and for emerging markets, the growth rate was projected to be twice that. The bar was high, and the market's appetite for disappointment was low.

Chris Weston, head of research at Pepperstone, captured the fragility of the moment. Traders were willing to cover short positions and unwind defensive bets, he noted, but that was fundamentally different from having the conviction to rebuild aggressive exposure to AI. The market was in a state of tactical repositioning rather than strategic commitment. Daniel Morris, chief market strategist at BNP Paribas Asset Management, underscored the stakes: technology hardware was driving earnings growth and stock price appreciation globally, and expectations were correspondingly elevated. Any sign of weakness in the sector could trigger a sharp repricing.

The weakness was already visible in some corners. Elice Group, a South Korean artificial intelligence infrastructure company, made its market debut on Tuesday after raising 201.1 billion won—roughly $151 million—in an initial public offering. The stock opened 16% below its IPO price, a stark signal that even AI-adjacent companies faced skepticism from fresh capital.

Currency markets showed the strain. The dollar index fell slightly to 101.92, the euro strengthened 0.06% to $1.12, the British pound gained 0.06% to $1.33, and the yen weakened 0.03% to 158.57 per dollar. Bitcoin dropped 0.67% to $81,386.40, and ether fell 0.54% to $2,385.75. Spot gold declined 0.51% to $4,118.71 an ounce.

Federal Reserve officials had recently signaled they were in no hurry to raise interest rates again. Chair Kevin Warsh had expressed optimism about US economic strength on Friday but offered no clarity on whether additional hikes were coming. European central bankers were scheduled to speak later in the day, and the Bank of England's Monetary Policy Committee was also due to weigh in. The market was waiting for signals from multiple directions—from corporate earnings, from geopolitical developments, from central banks—and until those signals arrived, caution was the dominant posture.