Global Financial Markets Decline as AI Stocks Fall

Financial markets in the US and Asia have experienced sharp declines as investors sell off shares in technology companies, particularly those linked to artificial intelligence (AI).

In New York on Wednesday, the S&P 500 dropped 2.3%, while the tech-heavy Nasdaq fell 3.6%, marking their largest one-day declines since 2022. The Dow Jones Industrial Average also decreased by 1.2%. Major tech firms, including Nvidia, Alphabet, Microsoft, Apple, and Tesla, were hit hard.

On Thursday, the Nikkei index in Japan led declines in Asia, falling by more than 3%. Shares in technology companies, especially AI-related ones, had been driving much of this year’s stock market gains. Nvidia, a key player in the AI chip market, saw its shares plummet 6.8%, losing about 15% of its value in the past two weeks. The company is set to report its financial results at the end of August.

Elon Musk’s Tesla, an electric car maker, saw its shares drop more than 12% following disappointing financial results. Alphabet, the parent company of Google and YouTube, saw its stock price fall 5% despite reporting financial results that exceeded analyst expectations. Alphabet, like many competitors, has heavily invested in AI technology.

In Asia, chip makers such as Renesas Electronics and Tokyo Electron in Japan, and South Korea’s SK Hynix, were among the significant fallers.

Jun Bei Liu, Portfolio Manager at Tribeca Investment Partners, noted, “Investors are now becoming more concerned about all this expenditure with AI without the revenue benefit.” She added, “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.”

Investor caution is also influenced by uncertainties surrounding the US presidential election campaign and the timing of a potential interest rate cut by the US central bank.