US tech stocks tumble as investors fret over AI spending
US tech stocks have dropped sharply amid market jitters over the sustainability of companies' enormous capital investments in AI.
The tech-heavy Nasdaq fell 2.6 percent on Thursday, its steepest drop since June 5 when it tumbled 4.2 percent. The broader S&P 500 slid 1.21 percent, marking its biggest decline since July 29.
Major Tech Companies Suffer Losses
Apart from Apple, which rose 1.2 percent, each of the 'Magnificent 7' tech giants saw substantial losses. Meta dropped nearly 7 percent after raising its projected capital spending for this year to $135bn to $145bn despite falling short of profit expectations. Amazon fell 4.6 percent, while Nvidia dropped 4.4 percent. Tesla and Alphabet both fell 3.1 percent, and Microsoft declined 2.2 percent.
The sell-off extended to other major tech players, including Intel and Advanced Micro Devices, both of which fell about 8 percent, and Broadcom, which slid 4.3 percent.
Market Sentiment Drives Decline
Rising oil prices since February, due to the fallout of the US-Israel war on Iran, added to the downbeat mood. Brent crude futures rose 4 percent on Thursday and continued climbing on Friday morning, taking the international benchmark above $114.20 a barrel, its highest since May.
Major stock markets in Asia opened lower on Friday, following the losses on Wall Street. Japan's benchmark Nikkei 225 fell more than 2 percent in morning trading before recovering some ground, while South Korea's KOSPI dropped as much as 3.5 percent. The Hang Seng Index in Hong Kong fell about 0.5 percent.
In short, nothing has changed. Investors have just decided to be afraid this week. Everyone I speak to points to a different cause for the downfall … It's just a giant wall of worry.
AI Investment Debate
US tech companies' huge investments in AI have stoked intense debate about whether a market bubble is forming similar to the one that preceded the 2000 dot-com crash. While some Wall Street analysts view current levels of investment in datacentres and graphics processing units as unsustainable, others argue that AI will revolutionize society to justify the eye-watering sums involved. Global AI investment is forecast to reach $2.7 trillion in 2026 and $3.6 trillion in 2027, according to technology insights company Gartner.
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