Asia Stocks Near Record Highs: Fed Rate-Cut Hopes and AI Supply-Chain Tailwinds Lead the Tape

Asian stocks advanced on Friday and, in several cases, flirted with fresh records as investors priced in an imminent shift to looser U.S. monetary policy and doubled down on the region’s AI ecosystem. The combination—lower expected real yields and rising demand for chips, tooling, and power—kept the bid strong across Japan, India, South Korea, and Taiwan, with mainland China joining the move on hopes that supportive policy and steadier risk appetite can buttress growth into year-end.

Japan set the tone. The Nikkei notched another record-setting push, paced by technology and manufacturing names that benefit from a weaker currency and a robust export cycle tied to AI compute. While some participants cautioned about “overheating” after the index’s steep ascent, flows remained oriented toward balance-sheet-healthy franchises with clear operating leverage to capital spending in semiconductors, interconnects, and electrification. The policy backdrop helps: even if the Bank of Japan proceeds with normalization, the market expects any moves to be gradual, keeping financial conditions manageable.

India supplied breadth. Benchmarks extended their rise for a second straight week, and the move wasn’t confined to a handful of heavyweights: small- and mid-cap indices also climbed, a hallmark of healthier risk appetite. Information technology led, aided by a high-profile buyback that signaled confidence in cash generation and long-run demand for digital services. Autos and industrials found support as investors looked through near-term noise toward a friendlier external rates environment and a domestic economy still generating steady nominal growth.

In the rest of North Asia, the AI theme remained the organizing principle. Taiwan’s market gained alongside chip designers and equipment makers, while South Korea captured renewed interest in memory and cyclical tech. Chinese equities turned firmer as traders weighed the idea that easier global policy and targeted domestic measures could lift sentiment and, in turn, spending. The open question is how far equity gains can go in repairing household balance sheets after property-related strains; for now, the marginal buyer appears willing to pay up for liquidity and policy-aligned sectors.

The catalyst sits in Washington. Markets now assign high probabilities to a quarter-point Fed cut next week and price a path of follow-on easing into 2026. Historically, that setup channels portfolio flows toward emerging and cyclical regions, compresses discount rates on future cash flows, and extends the runway for capex cycles tied to semiconductors and data-center buildouts. It also tends to soften the dollar, a tailwind for Asia’s exporters and for local financial conditions.

What could derail the trade? A surprise hawkish turn from the Fed, a faster-than-expected policy shift from the Bank of Japan, or a renewed bout of U.S. inflation stickiness would challenge the “lower-for-longer” real-yield narrative. Valuation fatigue in India and sentiment-dependent rallies in China are additional pressure points. Until those risks crystallize, the path of least resistance favors Asia’s AI supply chain and high-quality cyclicals—segments that stand to benefit most from the twin engines of policy easing and secular compute demand.