*

Surge in Chinese chipmaking stocks as U.S. futures fall

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Nvidia's ( NVDA ) shares retreat as investors assess earnings,

China

outlook

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Bank of Korea holds rates as expected

(Updates markets, adds effect on Asian chipmakers and Berkshire

purchases in Japan)

By Gregor Stuart Hunter

SINGAPORE, Aug 28 (Reuters) - Asian stocks experienced a

volatile session on Thursday as worries over the outlook for

artificial intelligence bellwether Nvidia's ( NVDA ) 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 ( NVDA ) 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 ( NVDA )

results.

Investor concerns about Nvidia ( NVDA ) 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 ( TSM ) tumbled 2.5%,

while Samsung Electronics ( SSNLF ) slipped 1%.

Nvidia's ( NVDA ) 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 ( MSBHF ) rose as much as 3.2%

after a unit of Warren Buffett's Berkshire Hathaway ( BRK/A )

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 ( MPNGF )

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.