HONG KONG: Asian investors battled Wednesday to kick-start a recovery in equities following the latest stagger across world markets that has been caused by worries over an AI-fueled bubble and uncertainty over US interest rates.

Stocks have endured a tough November as speculation has grown that the tech-led rally this year may have gone too far, and valuations have become frothy enough to warrant a stiff correction.

With the Magnificent Seven, including Amazon, Meta, Alphabet and Apple, accounting for the majority of the rally to record highs for Wall Street's three main indexes, there are worries that any problems with them could have huge ripple effects on markets.

And so the spotlight Wednesday turns on the earnings report from the biggest of the bunch: chip giant Nvidia, which this month became the first $5 trillion company.

Investors are nervous that any sign of weakness could be the pin that pops the AI bubble, having spent months fearing that the hundreds of billions invested may have been excessive.

"The AI complex, once the undisputed locomotive of 2025's rally, now sounds like an engine with sand in the gears," said Stephen Innes at SPI Asset Management.

"This isn't a crash, or a panic, or even a proper correction; it's the unmistakable sensation of a market trading at altitude with borrowed oxygen, suddenly aware of how thin the air has become."

He added that four days of losses in Wall Street's S&P 500, the VIX “fear index” hitting 25 — a level that causes traders concern — and a tone shift were “all signs that investors are finally blinking at the speed and scale of the AI capex boom.”

Meanwhile, a Bank of America survey of fund managers found that more than half thought AI stocks were already in a bubble, and 45% considered that the most significant “tail risk” to markets, ahead of inflation.

That came after the BBC released an interview with the head of Google's parent company, Alphabet — Sundar Pichai — who warned that every company would be affected if the AI bubble burst.

Still, after a tough run in recent sessions, Asia enjoyed a little stability as markets fluctuated between gains and losses.

Tokyo edged up but was anchored by simmering China tensions and questions over Japan's fiscal state, ahead of an economic stimulus package that has pushed government bond yields to record highs.

Hong Kong, Shanghai, Sydney, Singapore, Taipei, and Manila rose, but Seoul, Wellington, and Jakarta fell.

Also in sight this week is the planned release of key US data, particularly on job creation, which will be closely watched for clues about the Fed's plans for interest rates.

Investors have scaled back their bets on a third successive cut next month — weighing on markets of late — after a string of decision-makers, including bank boss Jerome Powell, questioned the need for another cut amid stubbornly high inflation.

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Asian markets bounce as Nvidia takes centre stage amid AI bubble fears