Asian markets are expected to open positively on Tuesday following a historic rally in U.S. stocks, driven by a major agreement between AMD (AMD.US) and OpenAI that boosted the semiconductor sector and pushed American equities to record highs. Both the S&P 500 and Nasdaq Composite closed at all-time highs on Monday, with investor sentiment remaining buoyant as markets continued to bet on future growth despite looming government shutdown concerns. Stock index futures indicate gains ahead for Japanese, Hong Kong, and Australian markets.

Meanwhile in Asia, options traders' bullish sentiment on the yen has dropped to its lowest level in over three years as Takaichi Sanae, who favors dovish policy stances, appears almost certain to become Japan's next Prime Minister. The yen fell 1.8% against the dollar, breaking through the 150 level, and hit a record low against the euro. Long-term bonds declined on concerns that Takaichi's policies would require increased government spending and drive up inflation.

Notably, the volatility in Japanese long-term bonds appears to be spreading to other long-term bond markets. Australian 10-year government bond yields rose 5 basis points in early Tuesday trading. Goldman Sachs warned that Takaichi's appointment could push up Japan's long-term yields, with every 10 basis points of "Japan-specific JGB shock" expected to create approximately 2-3 basis points of upward pressure on yields in the U.S., Germany, and the UK.

This year, Japanese government bonds have served as a bellwether for global counterparts, with ultra-long bond yields in the Asian nation surging and amplifying market turbulence triggered by concerns over expanding fiscal deficits. Goldman's warning has focused market attention even more intensely on long-term bonds, which are already under close scrutiny as governments increase borrowing and inflation proves more persistent than anticipated.

Additionally, gold continued its rally in early Asian trading, approaching $4,000 per ounce. Oil prices maintained Monday's gains after last week's decline, as OPEC+'s modest production increase over the weekend eased trader concerns about massive output increases.

According to reports, AMD and OpenAI have reached a collaboration agreement that could potentially give OpenAI approximately 10% of AMD's shares. The partnership will involve multi-year technical cooperation focused on high-performance graphics processors. This collaboration is viewed as a significant turning point in AI computing capacity deployment and has prompted investors to reassess AMD's future growth potential.

The AMD-OpenAI agreement was the primary driver behind the broad rally in U.S. technology stocks. Led by tech shares, the S&P 500 rose for the seventh consecutive trading day on Monday, marking its longest winning streak since May. Louis Navellier, founder and Chief Investment Officer of Navellier & Associates, commented: "The semiconductor sector is 'red hot.' The AI narrative continues to gain momentum."

Matt Maley, Chief Market Strategist at Miller Tabak, noted that it's unsurprising traders largely ignored issues like potential government shutdowns as the "animal spirits" surrounding the AI phenomenon received another boost.

Regarding the U.S. market outlook, Goldman Sachs strategists led by David Kostin believe American companies will deliver an earnings season that exceeds expectations, as robust economic conditions and AI's solid prospects have made previous forecasts appear too conservative. They also anticipate that the so-called "Magnificent Seven" will outperform expectations.

Callie Cox, Chief Market Strategist at Ritholtz Wealth Management, observed that markets feel "invincible," which explains why so many are discussing valuations. She stated: "Rising valuations aren't uncommon, but earnings need to take the baton for the rally to continue. Ideally, we want to see profits supporting stock prices."

Anthony Saglimbene, Chief Market Strategist at Ameriprise, believes that current AI infrastructure investments may not generate the returns investors expect, and valuations of some leading companies may need downward adjustment. However, he added: "Given the size and scope of companies and industries that haven't meaningfully utilized AI yet, we're not particularly concerned about being on the edge of an internet bubble."