In a period of significant volatility in the global technology sector, the FTSE 100 demonstrated an unusual resilience, largely due to its composition. While markets in the US and Asia experienced a considerable tech sell-off, the main UK index rose 0.19% to 10,800. This insulation was primarily attributed to the FTSE 100's dearth of technology stocks, which protected it from the recent AI jitters that swept across Wall Street and Asian markets. This allowed the index to weather declines seen elsewhere, particularly in semiconductor stocks.
The global tech downturn was triggered by various factors, including the blockbuster debut of ChangXin Memory Technologies (CXMT) on the Shanghai Star Market, which intensified concerns about increased competition in the semiconductor industry. This led to significant drops in Asian markets, with South Korea’s AI-heavy Kospi index plunging 10%, and Japan’s Nikkei shedding 4%. Established semiconductor players like SK Hynix and Samsung faced considerable pressure; SK Hynix, for instance, has lost 47% of its value since the end of June. The falls also came amidst concerns over financing risks tied to AI infrastructure spending and intensifying competition from China.
While largely insulated, the FTSE 100 was not completely immune to global turbulence. Lower crude prices, driven by improved hopes for a positive outcome in the Middle East, pulled down listed energy stocks. Centrica and SSE, for example, saw declines of 1.6% and 1.2% respectively. Meanwhile, other European indices showed mixed performance, with France's CAC 40 up 0.6% and Germany's DAX 40 up 0.4%.
In contrast to the tech sell-off, positive earnings reports provided a boost to the FTSE 100. Unilever saw an 8.0% increase after raising guidance, reporting underlying sales growth of 5.8% in the second quarter, surpassing consensus expectations of 4.3%. GSK also reported a strong core operating profit of £2.80 billion for the quarter. Admiral firmed 4.9% following an upgrade. However, Barclays was among the fallers after a "messy" earnings report. Susannah Streeter, chief investment strategist at Wealth Club, noted that the "AI-powered rollercoaster has taken another lurch downwards, with chip stocks falling sharply, as investors reassess rising competition and future demand."
