Financial markets in the US and Asia have experienced significant drops, driven primarily by a sell-off in technology companies, especially those linked to artificial intelligence (AI). On Wednesday, the S&P 500 and the tech-heavy Nasdaq saw their biggest one-day declines since 2022, losing 2.3% and 3.6%, respectively. The Dow Jones Industrial Average also dropped by 1.2%.
Leading the losses were major firms such as Nvidia, Alphabet, Microsoft, Apple, and Tesla. Nvidia, a key player in the AI chip market, saw its shares plummet by 6.8%, accumulating a 15% loss over the last two weeks. The company is set to report its financial results at the end of August. Tesla’s stock fell over 12% following underwhelming financial results. Alphabet’s shares dropped 5%, despite surpassing analyst expectations, due to anticipated high spending throughout 2024.
Japan’s Nikkei index also suffered, falling more than 3% on Thursday. Significant declines were observed in major Asian chip makers including Renesas Electronics, Tokyo Electron, and South Korea’s SK Hynix.
Jun Bei Liu, Portfolio Manager at Tribeca Investment Partners, noted that investors are growing concerned about the extensive spending on AI without corresponding revenue gains. This shift indicates a more critical approach towards returns in the AI sector rather than indiscriminately investing across the board.
Adding to the market’s unease are uncertainties surrounding the US presidential election campaign and the timing of potential interest rate cuts by the US central bank.