TSMC up nearly 6% as AI stocks rebound, Nikkei 225 gains 3%

The rebound did not come out of nowhere. After Tuesday's US midterms handed Democrats both houses of Congress, chipmakers and other AI-linked companies took a hammering, and the losses spread into Asia by Friday. Monday's session in Tokyo, Seoul and Taipei — the markets most heavily weighted with AI-linked tech giants — gave back some of that ground.

Part of the nervousness predates the election result. Traders were already anxious about when the hundreds of billions of dollars pumped into the sector would actually produce a profit, a question about capital expenditure and free cash flow that is unlikely to be resolved with any conviction in the near term. Against that backdrop, the valuation of many tech stocks now looks less expensive, which may help explain the appetite for bargains. Whether the gains are short-covering, bargain hunting or something more sustainable is what market participants will be trying to judge this week.

One reason the picture remains unsettled is the macro backdrop. October jobs figures came in far above expectations, and markets put an 80% chance on the Federal Reserve lifting rates at its December meeting. Investors are also monitoring Nvidia after the company opened an independent investigation into reports its CEO Jensen Huang had a relationship with a suspected Chinese spy, even as its board said it had no reason to believe company secrets or national security were compromised.