The Australian sharemarket is expected to open higher on Monday after futures pointed to a modest recovery following a mixed session on Wall Street, where investors grappled with concerns over the scale of artificial intelligence (AI) spending ahead of a crucial week of technology earnings.
ASX 200 futures were pointing to a gain of 48 points, or 0.6%, as of 6:30 am AEST Saturday (8:30 pm GMT Friday), suggesting the benchmark could recover some of last week's losses.
The move follows a cautious session in United States markets, with investors rotating away from technology stocks amid growing concerns over whether massive artificial intelligence infrastructure spending will generate sufficient returns.
The Dow Jones Industrial Average rose 235.6 points, or 0.5%, to 51,947.3, while the S&P 500 added 3.7 points, or 0.1%, to 7,412.0. The Nasdaq Composite underperformed, falling 161.9 points, or 0.6%, to 24,975.8.
For the week, the Dow declined 0.4%, the S&P 500 lost 0.6%, and the Nasdaq dropped 2% as investors reduced exposure to high-growth technology companies.
After years of strong gains driven by optimism around artificial intelligence, investors are now questioning whether the industry's aggressive capital spending plans can translate into sustainable profits.
"People are thinking, how do we make sense of all this spending, and how much more patient do we have to be before we actually see it translate to actual profits?" Peter Andersen, CEO of Andersen Capital Management, said in a Reuters report.
"The fear of missing out is becoming more like a fear of massive overbuilding."
The focus now turns to earnings reports from Microsoft, Amazon and Meta this week, with investors closely monitoring whether the technology giants can justify their expanding AI investments.
Concerns over spending discipline intensified after Alphabet increased its capital expenditure outlook, while Tesla chief executive Elon Musk warned that 2026 would be "a massive capex year" after the electric vehicle maker reported weaker-than-expected profits.
Technology sector volatility was also amplified by movements in energy markets, with crude oil prices briefly rising above US$100 a barrel before easing towards US$97 following reports Pakistan was attempting to restart negotiations between the United States and Iran.
In Australia, the S&P/ASX 200 Index fell 66.7 points, or 0.8%, on Friday to close at 8,772.3, with seven of the benchmark's 11 sectors ending lower.
For the week, the Australian benchmark declined 0.3% as investors remained cautious over global growth, energy prices and technology valuations.
On the bond markets, Australian government yields eased, with both the 10-year and two-year rates falling 0.4% to 5.027% and 4.659%, respectively.
