US tech stocks, particularly chipmakers and memory companies, suffered a sharp decline, contributing to a 1.5% fall in the Nasdaq Composite. Companies like Sandisk, Western Digital, Seagate, Intel, and Micron saw substantial losses, reflecting growing investor skepticism over the high valuations of AI-focused companies and a potential unwinding of leveraged bets. Strategists indicate an ongoing "investor deleveraging phase" which could continue to pressure equities.
Despite Taiwan Semiconductor Manufacturing Company (TSMC) reporting a 77% surge in quarterly profits and announcing plans for a $100 billion US investment, its shares still dropped. This suggests that even strong performance struggles to meet investors' "perfection"-level expectations for AI-related stocks. IBM's shares plummeted over 20% after issuing a profit warning, citing customers shifting spending towards AI infrastructure.
Momentum stocks, which had previously led the market, fell 6% on Thursday, contributing to a wider market pullback. Major tech companies such as Google and Amazon also saw declines amid concerns about their significant borrowing and spending on AI data centers. Adding to market uncertainty and inflation worries are geopolitical tensions and rising oil prices, with Brent crude settling at $84.23.
