Financial markets across the US and Asia experienced significant declines as investors offloaded shares in technology companies, with stocks related to artificial intelligence (AI) suffering the most.
On Wednesday, the S&P 500 dropped by 2.3%, while the tech-centric Nasdaq plummeted 3.6%—marking their steepest single-day losses since 2022. The Dow Jones Industrial Average also fell by 1.2%. These losses were largely driven by major tech firms, including Nvidia, Alphabet, Microsoft, Apple, and Tesla.
Asia followed suit on Thursday, with Japan’s Nikkei index leading the downturn, falling over 3%.
This year’s stock market gains have been heavily influenced by technology companies, particularly those involved in AI. Nvidia, a leading AI chip manufacturer and a significant beneficiary of the AI boom, saw its shares drop 6.8%, bringing its two-week decline to approximately 15%. The company is set to release its financial results at the end of August.
Tesla, the electric vehicle company led by Elon Musk, experienced a more than 12% drop in its shares following disappointing financial results. Alphabet, the parent company of Google and YouTube, saw its stock price decrease by 5%. Although Alphabet recently reported better-than-expected financial results, it also indicated that its spending would remain high for the rest of 2024, largely due to its significant investments in AI technology.
In Asia, chip manufacturers such as Renesas Electronics and Tokyo Electron in Japan, along with South Korea’s SK Hynix, were among the major decliners.
“Investors are becoming increasingly concerned about the extensive expenditure on AI without immediate revenue benefits,” said Jun Bei Liu, Portfolio Manager at Tribeca Investment Partners. “This isn’t the beginning of disbelief in AI but rather a shift towards focusing on returns within this sector instead of indiscriminately investing in it,” she added.
Investor sentiment was also impacted by uncertainties surrounding the US presidential election campaign and the timing of an anticipated interest rate cut by the US central bank.
