AI Euphoria Fuels Asian Chip Surge Amid Bubble Fears and Geopolitical Risks

Asian markets advanced in late October 2025, driven by global optimism around artificial intelligence (AI) and robust performance in semiconductor stocks. The rally was fueled by major deals in the tech sector, including a $100 billion investment by Nvidia in OpenAI and a record $500 billion valuation for OpenAI following an employee share sale. These developments propelled the Philadelphia Semiconductor Index and Asia chip stock indices to a combined $200 billion market capitalization increase, with valuations reaching 27 times forward earnings for the SOX Index and 19 times for Bloomberg's Asia chip gauge title5^[5].

Japan's Nikkei 225 hit a record high earlier in the week, lifted by surging demand for AI-enabling chips. While the index closed flat at 47,950.88 on October 7, chip-related stocks showed mixed performance. Advantest rose 0.64%, while Tokyo Electron and Lasertec fell 1.57% and 5.01%, respectively. The rally was attributed to a deal between OpenAI and Advanced Micro Devices (AMD), which analysts viewed as a direct challenge to Nvidia's dominance in the AI chip market title1^[1]. South Korea's Kospi Index also reached a record high, with SK Hynix surging 10% and Samsung Electronics up 3.5% amid AI-driven demand title5^[5].

China's blue-chip stocks edged up 0.1%, supported by investor enthusiasm for domestic AI advancements. The Hang Seng Tech Index gained approximately 50% year-to-date, driven by government-backed AI initiatives and corporate strategies from Alibaba and Huawei. However, Hong Kong's market lagged due to HSBC's restructuring. The bank announced plans to separate its UK and Asia-Pacific operations, creating distinct units for eastern and western markets to navigate geopolitical tensions. This move, aimed at simplifying governance and aligning with profit sources, came amid criticism over HSBC's support for China's 2020 Hong Kong crackdown and pressure from shareholders like Ping An Insurance to refocus on China .

Analysts highlighted the self-sustaining momentum in tech stocks, with Hebe Chen of Vantage Markets noting that "fear of missing out" (FOMO) is driving euphoria, despite concerns about a potential bubble. Morgan Stanley identified Taiwan Semiconductor Manufacturing Company (TSMC) and Winbond as top Asia chip stocks for AI growth, citing TSMC's expansion of advanced manufacturing nodes and Winbond's strategic positioning in AI-related components title4^[4]. Meanwhile, European chip equipment maker ASML surged 4.9% on October 2, adding to its 50% rise from August lows title5^[5].

The market surge, however, is not without risks. JPMorgan Asset Management warned that AI services have yet to achieve mainstream adoption, raising questions about the sustainability of current valuations. Additionally, U.S. sanctions on 29 Chinese firms and geopolitical tensions between China and the West remain watchpoints. Despite these challenges, investors remain optimistic, with the Federal Reserve's expected rate cuts further supporting equity markets.