Global stock markets are facing a widespread sell-off, driven largely by a sharp decline in technology stocks. This follows investor concerns about the sustainability of the artificial intelligence-related rally and the significant capital expenditure required to build AI infrastructure. Megacap tech companies have seen substantial losses; for instance, Alphabet fell 6% on Monday, erasing over $256 billion from its market capitalization, while Amazon declined 4.8%, and Meta Platforms and Microsoft each slipped approximately 3%.
The tech downturn has spread to Asian markets, with MSCI’s gauge of regional equities decreasing by more than 2% after a record high on Monday. South Korea's Kospi index plunged over 6% on renewed concerns about overstretched valuations in chip stocks, and even registered a 10% drop from its record high. Similarly, Japan's Topix was down 2.6%, Hong Kong's Hang Seng Index dropped 1.8%, and the Shanghai Composite Index retreated 1.4%.
US stock futures are also indicating further declines, with Nasdaq 100 contracts falling 2.6% and S&P 500 futures dropping 1.4% as of early Tuesday. European markets were not immune, as the technology sub-index of the Stoxx 600 fell 3.1%. The broader market unease is compounded by comments from Federal Reserve Chairman Kevin Warsh, whose hawkish stance on monetary policy, communicated last week, is fueling expectations of less accommodative conditions and potentially higher interest rates.
Despite the overall tech sell-off, some semiconductor and data storage companies, such as Micron Technology, have continued to perform well, benefiting from strong demand for AI-related hardware. Micron rose 5.8% after announcing a strategic agreement with Anthropic. However, the broader trend shows investors rotating out of high-performing tech shares and questioning whether the substantial investments in AI will yield sufficient returns to justify the spending.
