FILE PHOTO: A woman walks in front of a stock quotation board inside a builidng in Tokyo, Japan April 25, 2025. REUTERS/Issei Kato/File Photo

By Gregor Stuart Hunter

SINGAPORE (Reuters) -Asian stocks experienced a volatile session on Thursday as worries over the outlook for artificial intelligence bellwether Nvidia's China business hit its regional suppliers, while igniting outsized gains in its Chinese rivals.

MSCI's broadest index of Asia-Pacific shares outside Japan swung between gains and losses, and was last down 0.4%, as U.S. equity futures were dragged lower by an after-hours decline of 3.1% in shares of the chip designer, which has become the world's most valuable company. "After such a strong run, investor exposure was stretched, leaving little margin for disappointment," said Charu Chanana, chief investment strategist at Saxo in Singapore. "We should expect some spillover," she added, even though it is unlikely to hurt wider investor confidence.

"Asian chipmakers — especially in Korea and Taiwan — are the cleanest beta to Nvidia and will likely feel the drag."

In early European trades, pan-region futures were last flat, German DAX futures gained 0.1% and FTSE futures were up 0.1%.

The European single currency was unchanged on the day at $1.1642, holding on to a three-week winning streak that bumped up its gains this month to 2%, as traders dialled back expectations of the hit to French government borrowing costs stemming from the country's deepening political crisis. Following a two-day string of gains that has pushed U.S. markets to a record high, S&P 500 e-mini futures fell 0.1% and Nasdaq futures tumbled 0.3% after Nvidia's results.

Investor concerns about Nvidia centred on its China business, which hung in the balance, caught up in the trade war between Washington and Beijing. "We expect the stock to trade down modestly following an in-line quarter and guidance against a backdrop of elevated expectations heading into the call," analysts from Goldman Sachs wrote in a research report. "Management noted that it did not ship any H20 products to China in the quarter."

What also caused concern was that data centre revenues of $41.1 billion fell short of analyst expectations of $41.3 billion, said Mark Matthews, head of research for Asia at Bank Julius Baer in Singapore. "Granted it was minor, but a miss is odd for this company," he said. The chill was felt across the Asian tech sector, as Taiwan Semiconductor Manufacturing Company tumbled 2.5%, while Samsung Electronics slipped 1%. Nvidia's Chinese competitors surged, with SMIC gaining as much as 9.3%, and Cambricon Technologies, shares, which have almost tripled since mid-July, adding as much as 8.2%. The two chipmakers pushed the STAR 50 Index of Chinese growth stocks to a gain of as much as 5%.

Japanese stocks fluctuated between gains and losses after Kyodo news agency reported on Thursday that Japan's top trade negotiator Ryosei Akazawa cancelled a planned visit to the United States, where he was expected to iron out details of the trade deal agreed last month. The Nikkei 225 was last up 0.7%.

Shares in Mitsubishi Corp rose as much as 3.2% after a unit of Warren Buffett's Berkshire Hathaway said it had increased its stake in the company.

Korean stocks advanced 0.4% after the Bank of Korea kept rates on hold at 2.5%, as widely expected by economists.

Hong Kong stocks slumped, with the Hang Seng Index falling 0.9%, led by a decline of as much as 11.4% in Meituan shares, after the Chinese food delivery giant reported a drop in second-quarter profit on Wednesday.

In the currency markets, the dollar was on the defensive as traders ramp up bets of an interest rate cut next month, following Federal Reserve Chair Jerome Powell's recent dovish pivot and as President Donald Trump moves to assert control of the world's biggest central bank. Earlier this week, Trump said he is firing Federal Reserve Governor Lisa Cook, leaving some investors worried about the Fed's independence. Cook's lawyer said she will file a lawsuit against the White House.

Trump pressured the Fed to lower interest rates during his first term in the White House and he has escalated that campaign in recent months while seeking to make appointments to key positions on the U.S. central bank. The president has demanded that rates be cut by several percentage points and threatened to fire Powell, although he recently backed down from that. The yield on benchmark 10-year Treasury notes fell to 4.2227% compared with its U.S. close of 4.238% on Wednesday.

The market is currently pricing a 88.7% probability of a 25-basis point rate cut at Fed's policy meeting on 17 September, up from 61.9% a month ago, according to the CME Group's FedWatch tool. The dollar dropped 0.2% against the yen to 147.135. In commodities markets, Brent crude fell 0.8% to $67.49 per barrel. Gold was slightly lower. Spot gold was traded down 0.2% at $3391.60 per troy ounce. [GOL/]

(Reporting by Gregor Stuart Hunter; Editing by Shri Navaratnam and Sonali Paul)