AI investment cycle could hit bump in road,not from cutbacks by U.S . tech giants,but from growing market doubts about returns. Jefferies report says a big wealth shift's happening,especially in North Asia. Combined market cap of Korea and Taiwan jumped from $3.2 trillion at 2023's start to $9.8 trillion.
Investors worry about what this means . U.S. hyperscalers—Microsoft,Alphabet,Amazon, Meta—saw stock prices soar 180% since early 2023,beating S&P 500 by 44%. But since late May,they've dropped 8.7%,lagging the index by 10.2% from peak.
Jefferies flags a worrying pattern: these giants issued $144 billion in bonds this year,way up from $83 billion in 2025. Heavy debt for capital spending could mean "massive capital destruction" if returns flop. Market might soon shift focus from growth to sustainability of investments.
Geopolitical risks add another layer markets may be ignoring. Issues like Iran Memorandum of Understanding and NATO's role in Ukraine conflict could muddy investment waters. Jefferies suggests energy stocks as hedge against these uncertainties.
In Australia,signs of economic slowdown loom . Reserve Bank of Australia hiked rates to 4.35% to tackle inflation,which was 4.0% year-on-year in May . Sydney property prices fell 3.7% over five months,new tax changes could hit housing market harder. From July 2027,capital gains taxed up to 47%,and investment properties lose deductions unless new builds.
High borrowing costs,new tax rules likely to slash property deals and investor lending,which was 43.4% of new mortgages in New South Wales Q1 2026. Real GDP per hour worked dropped 5.1% since Q1 2022,and with dwelling values at 8.4 times median income,affordability's stretched .
Market-wise,Jefferies advises overweight in reanks up 54% since June 2025. But warns of concentration risks in Asia,where tech hardware now makes up 49% of MSCI AC Asia ex-Japan index . Diversifying to beat benchmark? Tougher than it seems…
