Financial markets in the US and Asia have experienced sharp declines as investors offload shares in technology companies, with artificial intelligence (AI) stocks particularly affected.
In Wednesday’s trading in New York, the S&P 500 dropped 2.3%, while the tech-heavy Nasdaq plummeted 3.6%, marking their biggest one-day falls since 2022. The Dow Jones Industrial Average also fell by 1.2%.
Major firms, including Nvidia, Alphabet, Microsoft, Apple, and Tesla, drove the losses.
On Thursday, Japan’s Nikkei index led the declines in Asia, falling by more than 3%.
Shares in technology companies, particularly those related to AI, have driven much of this year’s stock market gains. However, recent trends show a sharp decline.
AI chip giant Nvidia, one of the primary beneficiaries of the AI boom, saw its shares drop 6.8%. The company has lost about 15% of its value over the last two weeks and is set to report financial results at the end of August.
Shares in Tesla, the electric car maker led by multi-billionaire Elon Musk, fell by more than 12% following disappointing financial results.
Alphabet, the parent company of Google and YouTube, saw its stock price decrease by 5%. Although the company reported financial results earlier this week that beat analyst expectations, it also indicated that high spending would continue through the rest of 2024. Like many competitors, Alphabet has been investing billions into AI development and adoption.
In Asia, major chip makers such as Japan’s Renesas Electronics and Tokyo Electron, as well as South Korea’s SK Hynix, experienced significant declines.
“Investors are now becoming more concerned about all this expenditure on AI without the revenue benefit,” said Jun Bei Liu, Portfolio Manager at Tribeca Investment Partners. “I don’t think this will mark the start of the disbelief in AI… it just simply means investors will focus more on returns in this space than just buying the whole sector,” she added.
Additionally, investors remain cautious amid major surprises in the US presidential election campaign and uncertainties about the timing of an interest rate cut by the US central bank.
