International Stock Markets Fall as Investors Dump Tech and AI Stocks

Technology stocks, including AI-related shares, have been major contributors to the recent global market downturn. On Wednesday, both Nvidia and Tesla experienced significant losses.

Financial markets in the US and Asia witnessed substantial declines on Wednesday, with technology stocks, especially those connected to artificial intelligence (AI), suffering major losses.

The sell-off was fueled by worries about the significant spending on AI without immediate revenue gains.

In New York, the S&P 500 experienced a significant drop of 2.3%, while the Nasdaq, which is renowned for its emphasis on technology, saw a substantial decline of 3.6%. These declines represent the largest single-day drops since 2022.

The Dow Jones Industrial Average experienced a decline of 1.2%. Major technology firms like Nvidia, Alphabet, Microsoft, Apple, and Tesla were at the forefront of the losses.

Nvidia, a prominent player in the AI sector, experienced a significant decline in its shares, with a 6.8% drop that further contributed to a 15% loss over the previous two weeks. The company plans to announce its financial results by the end of August.

Meanwhile, Tesla’s shares experienced a significant decline of over 12% after releasing financial results that left investors feeling unsettled.

Alphabet, the parent company of Google and YouTube, experienced a 5% decline in its stock price. Despite reporting better-than-expected financial results earlier in the week, investors expressed concerns about Alphabet’s continued high spending on AI for the remainder of 2024.

Japan’s Nikkei index experienced significant declines, dropping by 3% in Asia. Shares of chip manufacturers such as Renesas Electronics, Tokyo Electron, and South Korea’s SK Hynix experienced significant losses.

Jun Bei Liu, Portfolio Manager at Tribeca Investment Partners, pointed out that investors are growing increasingly worried about the expenses associated with AI, without seeing the expected returns. I believe this will not be the beginning of skepticism towards AI. Investors will prioritize returns in this space rather than simply buying the entire sector.

In addition, the market has become more uncertain due to unforeseen events in the US presidential election campaign and speculation surrounding the US central bank’s decision on when to cut interest rates.