Global stock markets experienced a sharp downturn on Friday, particularly impacting technology and AI-linked shares, as investors grew wary of the sustainability of the recent AI-driven rally. The sell-off, which started on Wall Street, spread to Asian markets, causing significant losses for major technology companies. This decline follows weeks of pressure on chip stocks, with investors questioning if their prices had become overvalued and if the high demand for computer memory and processors could be sustained, especially if AI doesn't yield the promised profits and productivity.
Semiconductor companies were heavily hit, with the VanEck Semiconductor ETF falling almost 4%. Individual tech giants like Arm Holdings, Micron Technology, Advanced Micro Devices, and Broadcom each lost more than 5%. In Asia, SoftBank closed 9% lower, while Tokyo Electron lost over 8%, and Advantest slid 7.2%. Kioxia, a Japanese memory chipmaker, plummeted over 16% after a federal jury in Texas ordered it to pay $229 million for patent infringement. Taiwan's TSMC, despite reporting a 77% surge in profits and raising its full-year capital expenditure forecast to between $60 billion and $64 billion, saw its shares drop 7.29% as investors focused on concerns about the industry's aggressive investment cycle. Chinese technology stocks also weakened, with Tencent slipping 4.8%, Meituan falling 4.6%, Kuaishou losing over 7%, and Baidu and Alibaba easing 3.7% and 3.9% respectively.
Analysts attributed the sell-off to an unwinding of crowded AI momentum trades rather than a deterioration of long-term fundamentals, as investors increasingly questioned whether current valuations could be maintained amidst accelerating AI infrastructure spending. For instance, Andrew Jackson, a strategist at Ortus Advisors, noted that TSMC’s earnings were not seen as strong enough to justify further upside. Adding to the market's woes, oil prices continued to climb, with Brent crude rising 2.5% to $86.34, up from approximately $76 a week prior, due to geopolitical tensions in the Middle East. This combination of tech valuation concerns and rising energy costs further pressured stock markets globally, with the S&P 500 falling 0.7% on track for its first losing week in three.
