Asian equities experienced a downturn on Wednesday, mirroring a lackluster performance on Wall Street. Investors are bracing for a barrage of earnings reports that will likely influence the outlook for risk assets. Most significant regional benchmarks were in negative territory, with a notable decline in Hong Kong tech stocks, marking their second consecutive day of losses. Two-year Treasury yields, which are particularly sensitive to changes in interest-rate policy, decreased by four basis points during early Asian trading.

Market participants are keenly observing whether the current enthusiasm for artificial intelligence (AI) has further room to grow, especially with Nvidia Corp., one of the most influential stocks globally, set to release its earnings report. The tech sector’s sentiment has been dampened by disappointing earnings from Chinese e-commerce giant PDD Holdings Inc. earlier this week. Additionally, key Chinese companies such as Cnooc Ltd., BYD Co., and Meituan are slated to report their earnings on Wednesday.

Jun Rong Yeap, a market strategist at IG Asia Pte., emphasized the significance of Nvidia’s results, stating, “Nvidia’s earnings will be crucial for global markets, given the substantial optimism surrounding AI stocks over the past year. The stock’s current high price suggests strong expectations, which could lead to significant market movements if there are any negative surprises.”

In corporate news within Asia, China’s leading automaker BYD announced its plans for nearly half of its future sales to come from overseas markets. This indicates BYD’s strategy to establish global production hubs to mitigate the impact of heavy tariffs.

Japanese electronics giant Sony Group Corp. saw its shares rise by up to 2.7% following its announcement to increase the price of the PlayStation 5 in Japan. Conversely, shares of Seven & i Holdings Co., which operates 7-Eleven stores, declined after seeking regulatory designation that may complicate potential takeover bids.

In other market developments, Bitcoin dipped below the $60,000 mark early Wednesday amid a broader retreat in the cryptocurrency market, which also saw Ether, the second-largest token, experiencing a significant drop.

The oil market saw a rebound on Wednesday after a decline in the previous session ended a three-day rally. Gold prices retreated after a three-day rise brought them closer to their all-time high.

On the economic front, US consumer confidence reached a six-month high in August due to improved views on the economy and inflation, although optimism about the labor market has waned. Meanwhile, the Australian dollar strengthened after July inflation data surpassed expectations.

Amid uncertainties regarding Federal Reserve policies, economic conditions, and the upcoming US presidential race, one aspect remains evident: AI spending continues to be a critical focus on Wall Street. Chris Senyek from Wolfe Research commented on the market outlook before a crucial US payrolls report on September 6, stating, “We remain bullish, but near-term risks are skewed to the downside. Seasonally, we are entering a weaker period, which is more pronounced in election years.”

Investors are anticipating significant volatility in Nvidia’s shares following its earnings report from the $3.2 trillion company. Options market trading suggests nearly a 10% move in either direction post-results. Nvidia’s stock has surged approximately 160% this year and 1,000% since its October 2022 bear-market low. Analysts forecast over 70% revenue growth for the current quarter, with some predicting even higher figures. Nvidia’s results and projections will serve as an important indicator of AI spending trends across the technology sector.

This analysis was prepared with contributions from Bloomberg Automation.