Asian markets fall as Tesla drops 8% despite Wall Street’s AI gains

Asian markets declined Friday following Wall Street’s record-setting session, as gains from Alphabet and AI stocks were offset by Tesla’s steep drop. The mixed performance reflects ongoing uncertainty around trade negotiations, with key meetings scheduled between U.S. and Chinese officials as tariff deadlines approach.

Market performance: Asian indices mostly retreated despite Wall Street’s continued momentum to new highs.

• Japan’s Nikkei 225 fell 0.7% to 41,511.09, though markets found some relief after Trump announced a reduced 15% import tax on Japanese goods instead of the previously threatened 25% rate set for August 1.
• Hong Kong’s Hang Seng dropped 1.1% to 25,383.07, while Shanghai’s Composite index slid 0.3% to 3,593.38.
• South Korea’s Kospi bucked the trend with a 0.3% gain to 3,199.91.

What drove U.S. gains: Alphabet’s strong earnings and increased AI investment powered tech sector momentum Thursday.

• The S&P 500 added 0.1% to close at a record 6,363.35, while the Nasdaq composite rose 0.2% to 21,057.96.
• Alphabet, the parent company of Google and YouTube, climbed 1% after delivering higher-than-expected quarterly profits and announcing a $10 billion increase in AI chip investments, bringing its total budget to $85 billion this year.
• Nvidia, the leading AI chip manufacturer, gained 1.7% as the company benefited from sector optimism, providing the strongest single boost to the S&P 500 given its massive market capitalization.

Tesla’s reality check: The EV maker’s 8.2% plunge highlighted ongoing challenges despite meeting analyst expectations.

• CEO Elon Musk warned of “several rough quarters” ahead, citing a “weird transition period where we’ll lose a lot of incentives in the U.S.”
• Investors remain concerned about how Musk’s political involvement may be alienating potential customers, overshadowing the company’s AI and robotaxi initiatives.

Trade tensions in focus: Critical negotiations loom as tariff deadlines approach next month.

• U.S. Treasury Secretary Scott Bessent will meet with Chinese officials in Stockholm next week to work toward extending the tariff truce that expires August 12.
• Trump indicated a China trip “is not too distant” as trade tensions show signs of easing, though markets remain cautious about potential tariff adjustments.

Economic indicators: Japan’s inflation data showed continued moderation, with Tokyo prices rising 2.9% year-over-year in July, down from 3.1% in June.

• ING Economics, a financial research firm, expects the Bank of Japan to hold rates steady at its July 30-31 meeting while likely raising inflation forecasts.
• The data suggests government efforts to moderate price pressures are working, though underlying inflation concerns persist.