Stocks bounce back as Warsh and Huang ease AI fears

Global stock markets rallied on Friday following a period of heavy selling driven by concerns over the artificial intelligence sector, with Federal Reserve Chairman Kevin Warsh and Nvidia head Jensen Huang offering reassurances about the technology's economic benefits and the financial stability of key players.

Warsh, speaking at the International Monetary Fund and World Bank meetings in Bangkok, described AI as the "most consequential change" to the global economy in his lifetime. While he acknowledged that the investment boom would drive prices up in the short term, he stated there is a "huge benefit to the global economy" over the long horizon. However, he cautioned that the path forward would be "very bumpy" due to uncertainties regarding market structure and technological understanding.

Simultaneously, Huang addressed investor anxieties surrounding CoreWeave, a US neocloud provider whose shares had dropped 15.5 percent on Wednesday amid fears over its substantial debt load. Huang defended the company's health on Thursday, asserting that its situation was improving. While CoreWeave shares initially rallied in response, they fell back by more than seven percent during early New York trading on Friday.

Asian markets led the recovery, with the Seoul Kospi and Tokyo Nikkei 225 indices posting strong gains. The surge was fueled by bounces in chipmakers SK hynix and Kioxia, which helped lift sentiment across European stock exchanges as well. The Nikkei 225 closed up 1.4 percent at 65,324.29, while the Kospi rose 2.1 percent to 5,668.05.

In contrast, the Jakarta stock market suffered a loss of more than 11 percent, marking its steepest decline since 1998. This drop followed a statement from index compiler MSCI, which cited transparency concerns and declared it "no longer appropriate" to maintain Indonesia's emerging-market status. A potential downgrade to "standalone" status has raised fears of an exodus of foreign investment from the Indonesian market.

Wall Street opened mixed after a volatile week characterized by fears that client spending on AI models is not keeping pace with sector investments. The Dow Jones Industrial Average gained 0.5 percent to 52,431.28 points, while the S&P 500 remained flat at 7,742.43. The tech-heavy Nasdaq Composite declined 0.6 percent to 26,546.88.

European indices also moved higher, with the Frankfurt DAX up 1.2 percent at 25,677.09 and the Paris CAC 40 rising 0.5 percent to 7,972.12. The London FTSE 100 added 0.4 percent to reach 10,886.71. In currency markets, the euro strengthened against the dollar to $1.1249 from $1.1213 on Thursday, while the pound rose to $1.3347 from $1.3274. Oil prices were subdued, with Brent crude down 0.2 percent at $105.74 per barrel and West Texas Intermediate flat at $97.95 per barrel.

Susannah Streeter, chief investment strategist at Wealth Club, noted that investor nerves were calmed by Huang's defense of CoreWeave, which she said justified the company's investment in cloud infrastructure. Gregoire Kounowski, an adviser at Norman K., observed that the AI sector is entering a new phase focused on proving profitability after years of being supported by growth prospects.