The Australian sharemarket is poised to outperform Wall Street this week as investors express caution over potential restrictions on artificial intelligence and data centres in North America, redirecting capital towards domestic blue-chip stocks. Futures indicate the S&P/ASX 200 is set to open 0.2 per cent higher on Monday, following a subdued recovery in the United States. The Nasdaq 100 saw a 1.4 per cent rise after an earlier plunge, but broader sentiment remains cautious following its nearly 5 per cent tumble last week. Stephen Innes of SPI Asset Management noted the institutional crowd remains “shell-shocked” with the Federal Reserve still leaning hawkish.
A recent Democratic Party sweep of Congress, raising prospects of restrictions on the vast data centre buildout underpinning the AI boom, contributed to a $US2.3 trillion market wipeout. CoreWeave is a Nasdaq-listed infrastructure business that builds data centres primarily for cloud services, crucial for supporting the burgeoning artificial intelligence sector. Its shares have nearly halved over the past month amidst concerns over its debt-heavy expansion. Barclays highlighted that 80 per cent of the high-probability data centre pipeline now resides in states with Democratic governors, likely leading to increased regulatory scrutiny. This contrasts with the S&P 500’s 2.7 per cent fall last week, while the ASX 200 rose 1.3 per cent, benefiting from investors seeking safety in major banks, retailers, and local telecommunications companies.
Perpetual head of investment strategy Matthew Sherwood suggested the ASX could continue to benefit from a “re-positioning away from AI.” Adding to Wall Street’s tension are growing expectations that the Federal Reserve will continue tightening policy to combat inflation. Bond traders increased bets on a Fed rate hike next month following a strong jobs report. Investors will closely monitor October inflation data this week, the last before the Fed’s December meeting, for clues on future rate strategy; about two more quarter-percentage-point increases are expected. Uncertainty is further compounded by the conflict in Iran, which saw oil futures tumble 13.2 per cent last week.
