Financial markets in the US and Asia have experienced sharp declines as investors sell off shares in technology companies, with artificial intelligence (AI) stocks bearing the brunt of the losses.
On Wednesday in New York, the S&P 500 fell by 2.3%, and the tech-heavy Nasdaq dropped 3.6%, marking their largest single-day declines since 2022. The Dow Jones Industrial Average also saw a decline of 1.2%.
Major technology firms, including Nvidia, Alphabet, Microsoft, Apple, and Tesla, were key contributors to these losses.
On Thursday, Japan’s Nikkei index led the downturn in Asia with a drop of over 3%.
Technology stocks, especially those related to AI, have been major drivers of this year’s stock market gains.
Nvidia, a leading AI chip maker and a significant beneficiary of the AI boom, saw its shares fall by 6.8%, losing about 15% of its value over the past two weeks.
The company is expected to report its financial results at the end of August.
Tesla, the electric car company led by Elon Musk, saw its shares plummet more than 12% following disappointing financial results.
Alphabet, the parent company of Google and YouTube, experienced a 5% drop in its stock price.
Despite reporting financial results that exceeded analyst expectations earlier this week, the company noted that its spending would remain high through the end of 2024.
In Asia, chip makers such as Japan’s Renesas Electronics and Tokyo Electron, as well as South Korea’s SK Hynix, were among the major losers.
“Investors are now becoming more concerned about all this expenditure with 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.
Investors are also wary after major surprises in the US presidential election campaign and the timing of an interest rate cut by the US central bank.