By V.E.K.Madhushani, Jadetimes News
Tech Sector Leads Losses, Investors React to AI Volatility
Financial markets in the US and Asia have seen significant declines as investors offload shares in technology companies, particularly those associated with artificial intelligence (AI). On Wednesday, the S&P 500 dropped by 2.3%, and the tech heavy Nasdaq fell by 3.6%, marking their most substantial single day losses since 2022. The Dow Jones Industrial Average also decreased by 1.2%.
Key firms such as Nvidia, Alphabet, Microsoft, Apple, and Tesla drove these losses. Japan's Nikkei index led the declines in Asia on Thursday, falling by more than 3%.
AI related technology companies have been pivotal in this year's stock market gains. However, Nvidia, a leading AI chip manufacturer, experienced a 6.8% drop in its share price, losing approximately 15% of its value over the past two weeks. Nvidia is scheduled to report its financial results at the end of August.
Elon Musk's electric car company Tesla saw its shares plummet by more than 12% following financial results that failed to meet investor expectations. Alphabet, the parent company of Google and YouTube, saw a 5% decline in its stock price. Despite reporting financial results that surpassed analyst expectations, Alphabet indicated that its spending would remain high throughout the rest of 2024. Like many of its competitors, Alphabet has heavily invested in AI technology.
In Asia, major chip makers such as Renesas Electronics and Tokyo Electron in Japan, along with South Korea's SK Hynix, were among the significant losers.
"Investors are now becoming more concerned about all this expenditure on AI without the revenue benefit," said Jun Bei Liu, Portfolio Manager at Tribeca Investment Partners. "I don’t think this will mark the start of disbelief in AI. it just simply means investors will focus more on returns in this space than just buying the whole sector," she added.
Additionally, investor sentiment has been cautious due to surprises in the US presidential election campaign and uncertainty surrounding the timing of an interest rate cut by the US central bank.
