Investors were also weighing central bank actions this week in which the Federal Reserve held rates steady on Wednesday, in line with expectations, with Fed Chair Jerome Powell saying there would be no rush to cut them again. The European Central Bank on the other hand cut interest rates on Thursday.

With markets in mainland China, Hong Kong and Taiwan still closed for the Lunar New Year, the return of South Korea grabbed the spotlight in Asia. The benchmark KOSPI slid 1 percent, after China's DeepSeek unveiled earlier this week a breakthrough in cheap AI models that triggered a global market rout.

Shares of Samsung Electronics, which projected limited first quarter earnings growth on Friday, fell 3 percent, while SK Hynix, a key supplier to Nvidia, slipped 8 percent.

That left the MSCI's broadest index of Asia-Pacific shares outside Japan down 0.3 percent but still on course for a 1 percent gain this month, snapping its three month losing streak.

Nasdaq futures rose 0.6 percent in Asian hours after Apple executives forecast relatively strong sales growth, a sign the company will recover from a dip in iPhone sales as it rolls out artificial intelligence features.

Technology stocks stumbled badly on Monday as investors factored in implications from the low-cost Chinese AI model, with shares of high-profile tech names such as Nvidia, Broadcom and Oracle getting pummeled.

But tech stocks have recouped some of those losses, with CEOs of Microsoft and Meta defending massive spending, saying it was crucial to staying competitive in the new field.

Vasu Menon, managing director of investment strategy at OCBC, said the DeepSeek development may create some uncertainty and put some pressure on valuations of AI players in the short term, but it does not alter the medium to long term outlook.

"The need for increased AI infrastructure will continue and any new computing capacity should get absorbed by increased AI demand which could grow significantly in the coming years."

TARIFF THREAT

Data on Thursday showed US economic growth slowed in the fourth quarter, but remained robust enough for investors to expect the Fed to lower rates only gradually this year.

Markets are pricing in 45 basis points of easing this year, with traders getting comfortable with the idea of two rate cuts this year, LSEG data showed.

Investor focus will now switch to the December US personal consumption expenditures (PCE) price index report, Fed's favored gauge of inflation, due later in the day.

President Donald Trump's policies remain a risk for the Fed's policy outlook, and Saturday is likely to see new tariffs slapped on Canada, Mexico and possibly China.

The Mexican peso and Canadian dollar remained on guard ahead of the Saturday deadline set by Trump to impose 25 percent tariffs on imports from Mexico and Canada.

In Japan, the yen was last a touch stronger at 154.19 per dollar, having already climbed more than 1 percent for the week thus far. It was set to gain 1.9 percent for the month, which would mark its best January performance in seven years.

Expectations of further rate increases from the BOJ this year has boosted the yen, with Deputy Governor Ryozo Himino saying on Thursday that the central bank will continue to raise rates if the economy and prices move in line with the bank's forecasts.

In commodities, gold rose to $2,799.71 an ounce to hit record levels, and was on course for a 6.5 percent rise in January, its strongest monthly performance since March.

Oil prices rose in early Asian trading on Friday as investors weighed the prospect of US tariffs on Canadian and Mexican crude imports that could take effect this weekend.

Brent crude futures was 0.4 percent higher at $77.21 a barrel. US crude futures rose 0.5 percent to $73.13 a barrel.