‘Tech carnage’: AI stocks plunge as investors spooked by gloomy earnings
The global tech sell-off deepened on Friday after a string of heavily disappointing earnings revived fears over the pace and scale of AI spending.
The Nasdaq Composite Index plunged 2.2 per cent at the open on Friday after a $500bn rout in Google-owner Alphabet’s shares on Thursday. Roughly $3 trillion has been wiped off the tech-heavy index since its peak on 6 October.
Chipmaker Intel’s gloomy forecast of lower than expected revenue driven by a persistent PC market slump and supply chain issues, had a chilling effect, as shares plunged more than 28 per cent on market open.
Investors were also spooked by Amazon’s results following market close on Thursday, as the e-commerce giant recorded weaker than expected sales and gave a lacklustre outlook for its retail operation.
Amazon’s shares tumbled 2.7 per cent, which analysts said showed investors are expecting a “bleak Christmas period ahead”.
Neil Wilson, UK investor strategist at Saxo, said the sell-off showed “tech carnage as October wraps up”, as all stocks with exposure to AI went into “meltdown”.
Fellow Magnificent Seven companies, Microsoft and Nvidia also slipped 1.9 per cent and 3.5 per cent respectively.
Shadows cast over Asia
The sell of on Thursday seeped into Asia, with Deutsche Bank analyst Jim Reid saying the US rout “exacerbated” losses across the region.
Japan’s Nikkei 225 fell 2.1 per cent, with losses led by Fujitsu which plummeted 16.2 per cent to 3,622 yen (£17.1), and electronics firm Ividen which declined 15.2 per cent.
OpenAI investor Soft Bank slipped six per cent, taking its losses to 48 per cent from its June peak.
South Korea’s blue-chip index fell 3.4 per cent, as its heavyweights Samsung Electronics and SK Hynix fell three per cent and 1.5 per cent respectively.
FTSE rides high
Despite Amsterdam-listed chipmaker ASML falling 5.7 per cent, Europe’s wide-spread lack of exposure to technology leaders allowed it to dodge the AI fallout.
In particular, the FTSE 100 was hailed an “island of tranquility” by Wilson, after the index climbed 0.3 per cent in early trading. Since January, the index has gained eight per cent.
Wilson said: “The FTSE 100 looks like an island of tranquillity amid all the carnage in tech. It’s often been the outperformer when the global market leaders- tech- turns south. Valuations remain compelling and earnings growth is good.
The FTSE 100 remains a safe bet, fundamentally anchored by old-economy sectors that deliver tangible returns. It might not be flashy but it’s reliable.”
But London Stock Exchange’s few tech stocks on the AIM market were not immune to the global problem. Raspberry Pi tumbled 4.6 per cent 555p, while Computacenter shed 3.4 per cent.