Asian shares slip as tech selloff reshapes interest rate outlook

Asian share indices weakened as investors digested concerns over an artificial intelligence bubble that could undermine data-centre investment and weigh on US economic growth. The technology-driven selloff, which accelerated across major exchanges, prompted a significant repricing of monetary policy expectations.

Markets have begun scaling back bets on the pace of Federal Reserve tightening, with investors now pricing in a more cautious approach to interest rate increases than previously anticipated. This reassessment reflects growing anxiety that elevated valuations in AI-related stocks may not be sustainable, and that a correction could have broader economic consequences.

The shift in sentiment favoured bonds, which attracted buyers seeking safety as equity volatility climbed. Yields on major government bonds declined as investors moved away from riskier assets, a pattern consistent with previous episodes of technology stock weakness.

The downturn reflected a broader re-evaluation of the economic cycle by international markets. Investors are now weighing whether enthusiasm over artificial intelligence applications will translate into durable productivity gains or whether current valuations have run ahead of fundamentals. This uncertainty has created pressure on equity markets while simultaneously supporting traditional safe-haven assets across the region.