Global strategist Andrew Freris, CEO of Ecognosis Advisory Co., warns that the AI-driven rally propelling US equities to record highs may be resting on increasingly fragile foundations. Speaking to ET Now, Freris pushed back against the widely held view that strong earnings and AI-led capital expenditure justify current market levels. "I have to disagree completely that earnings growth has been good," Freris said. "The earnings growth of some of the most important stocks, for 2025, they had no earnings at all. They had no profits. In the first quarter, they continued to have losses." He argues that investors have become increasingly willing to overlook current fundamentals in favour of future AI-driven expectations. A key concern for Freris is the scale of investments being announced globally under the AI theme, particularly when visibility on eventual demand remains uncertain. He was equally sceptical about the growing AI investment race in Asia, citing South Korea's plans for substantial spending in the sector, noting that "Korea joined the dance with one trillion US dollars spending on artificial intelligence investments."
Korea's market rebound was driven by Seoul's vast AI and semiconductor investment programme, not a generic regional risk rally, according to Investing.com India. The KOSPI opened weak, then recovered sharply as investors absorbed Seoul's new AI and semiconductor investment programme. Korea is targeting at least ₹1,350 trillion of private investment into semiconductor manufacturing and AI data centres, with Samsung and SK outlining broader commitments that could reach roughly ₹4,755 trillion, or about $3.1 trillion, across memory, fabs, advanced packaging, data centres, power infrastructure, displays, robotics and physical AI. This represents a fundamental shift from being a key supplier in the AI race to becoming one of the places where the race must physically be run. Samsung's spending spans Yongin semiconductor fabs, HBM backend packaging, next-generation displays, AI data centres and physical AI production, while SK is coupling major memory investment with an AI-infrastructure buildout that could reach 15 gigawatts of data-centre capacity by 2035. However, Freris questions this approach, noting that "like the Americans, they haven't told us who is going to buy the products that one trillion is going to produce."
US stock futures traded mildly higher on Monday, following reports that the Trump administration called for halting fresh airstrikes and drone attacks between the US and Iran ahead of peace talks in Doha. According to Trading Economics, the conflict escalated since Thursday with Iran targeting a container ship, Qatari oil vessel, and military bases in Kuwait and Bahrain, triggering multiple retaliatory US strikes. Tehran threatened to halt peace negotiations while Trump warned of complete elimination if compliance wasn't met. Dow Jones futures gained 0.3% while Nasdaq 100 and S&P 500 futures each rose over 0.5% at the time of writing. While there is an expectation that Washington and Tehran will finalize a deal to end their conflict and reopen the Strait of Hormuz, the process has been fraught with tensions between the long-time foes. On Friday, the S&P 500 lost less than 0.1% to 7,354.02 and the technology-heavy Nasdaq composite dropped 0.2% to 25,297.62, while the Dow Jones Industrial Average fell 0.1% to 51,876.11.
Despite the strong performance of Wall Street, Freris continues to favour selected Asian markets over the United States, citing excessive concentration in US equities. "The S&P is one of the least best-performing markets in the world and still people carry on buying them. Why? Again, I have absolutely no idea," Freris said. He maintains that he is advising clients to "reduce exposure to US equities rather than increase it." Among Asian markets, Freris expressed a constructive view on Japan, citing economic resilience, monetary policy credibility and higher defence spending. "Japan has a reasonably good economy. It has quite a safe central bank, which is going to increase interest rates because they don't like their inflation," he said. Freris noted that "they haven't gone crazy on artificial intelligence. And that's important." He also highlighted government spending priorities that extend beyond artificial intelligence, including "a lot on defence. Defence is always one of my favourite sectors." India is described as a market with neither major positive nor negative triggers, contributing to relatively muted performance. Freris suggested that "India has been disadvantaged by investor perceptions that it lacks a dominant AI investment narrative," but noted that "India's relative restraint on AI spending could ultimately prove beneficial."
The narrative focuses on artificial intelligence return on investment and whether cost pressures are starting to cascade down the supply chain, according to Capital.com's Kyle Rodda. Last week's announcement by Apple shows that cost pressures caused by the demand for raw materials for the AI build-out are about to hit consumers directly. In Southeast Asia, Thailand's stock index rose more than 1%, driven mainly by electronic products manufacturer Delta Electronics Thailand, which rose around 5% on Monday and 84% this year. However, Malaysia's stocks shed 0.5% and Jakarta slid 0.4%, with the index tracking its sixth consecutive month of declines with losses of about 4.5% in June. The Malaysian ringgit led gains, rising over 0.6% to 4.063 per dollar, touching its highest point in nearly two weeks. Japan's and South Korea's markets have soared as many of their Big Tech firms were lifted by demand for computer chips and other high-valued components used in artificial intelligence. Recent worries over AI valuations have trimmed some of those gains, with Tokyo's Nikkei 225 shedding 1% to 68,704.70 after falling 4.2% on Friday, and South Korea's Kospi losing 2% to 8,246.50.
Crude oil prices opened higher on Monday with Brent crude up 0.7% to $73.27 per barrel and benchmark US crude gaining 0.8% to $70.02 per barrel. The price of a barrel of WTI crude oil fell to $69.23 on Friday, down 9% on the week and marking the lowest weekly close since February 27. The US dollar strengthened to 161.81 Japanese yen from 161.71 yen, while the euro remained unchanged at $1.1386. Following the new hostilities during the weekend, these commodity and currency movements are expected to influence market sentiment throughout the week. As per ING commodities strategists Warren Patterson and Ewa Manthey, there's still plenty of risk facing the oil market over US-Iran re-escalation, as more questions were raised about the safety of ships in the Strait of Hormuz following attacks on vessels. Oil traders have been "too optimistic" about the timeline for a recovery in Persian Gulf supplies, they said, with "this complacency leaving significant upside risk if the supply recovery proves slow."
