Global Markets Plunge as Investors Sell Off Tech and AI Stocks

Financial markets in the US and Asia have fallen sharply as investors sold off shares in technology companies, with artificial intelligence (AI) stocks particularly affected. 

On Wednesday, the S&P 500 dropped 2.3% and the tech-heavy Nasdaq fell 3.6%, marking their largest single-day declines since 2022. The Dow Jones Industrial Average also decreased by 1.2%. Major firms including Nvidia, Alphabet, Microsoft, Apple, and Tesla led the losses.

In Asia, Japan’s Nikkei index saw a more than 3% decline on Thursday, leading the region’s market downturn.

AI-related stocks, which have driven much of this year’s market gains, were hit hard. Nvidia, a key player in the AI chip market, saw its shares fall 6.8%, losing about 15% of its value over the past two weeks. Nvidia is set to report its financial results at the end of August.

Tesla’s shares dropped over 12% following disappointing financial results. Alphabet’s stock price fell by 5% despite reporting better-than-expected financial results earlier in the week; the company projected high spending for the rest of 2024, primarily on AI development.

In Asia, chip makers such as Renesas Electronics, Tokyo Electron, and South Korea’s SK Hynix experienced significant losses. Jun Bei Liu, Portfolio Manager at Tribeca Investment Partners, noted investor concerns about high AI expenditure without corresponding revenue benefits. She emphasised that this shift doesn’t signal disbelief in AI but rather a more cautious approach from investors focusing on returns.

Investor anxiety was further fuelled by uncertainties in the US presidential election campaign and the timing of an interest rate cut by the US central bank.