Financial markets in the US and Asia witnessed significant declines as investors rushed to sell shares, particularly in technology firms, amidst a downturn in artificial intelligence (AI) stocks.
In Wednesday’s trading session in New York, the S&P 500 plummeted by 2.3%, marking its most substantial single-day drop since 2022, while the Nasdaq, heavily weighted with tech stocks, fell sharply by 3.6%. The Dow Jones Industrial Average also slipped, recording a 1.2% decline.
The sell-off was notably driven by prominent companies such as Nvidia, Alphabet, Microsoft, Apple, and Tesla.
Meanwhile, in Asia on Thursday, Japan’s Nikkei index led the downturn with a decline of over 3%.
Technology companies, particularly those involved in AI, have been pivotal in driving stock market gains this year.
Nvidia, a key player in AI chips, suffered a significant 6.8% drop in its stock price, reflecting a 15% decrease in value over the past fortnight. The company is scheduled to release its financial results by the end of August.
Tesla, led by multi-billionaire Elon Musk, saw its shares plummet by more than 12% following disappointing financial results that failed to meet investor expectations.
Alphabet, the parent company of Google and YouTube, experienced a 5% decline in its stock price despite reporting financial results that exceeded analysts’ forecasts. The company indicated that its high spending in 2024 would persist, reflecting its substantial investments in AI development and adoption.
In Asia, chip makers such as Renesas Electronics, Tokyo Electron, and SK Hynix in Japan and South Korea respectively, also witnessed substantial declines.
“Investor concerns are mounting over the substantial investments in AI technology without corresponding revenue gains,” noted Jun Bei Liu, Portfolio Manager at Tribeca Investment Partners. She added, “This may shift investor focus towards seeking returns rather than broad sector investments.”
Furthermore, investor caution persists amidst unexpected developments in the US presidential election campaign and uncertainty surrounding the timing of US Federal Reserve interest rate adjustments.
This downturn reflects a broader reassessment of AI-related investments in the market, highlighting a potential shift towards more discerning investment strategies in the technology sector.
