The tech stock sell-off has failed to obscure signs of resilience across wider markets, with US futures and European shares edging higher as traders took encouragement from continuing talks between Saudi Arabia and Iran and Moody’s decision to leave France’s credit rating unchanged.
France’s 10-year borrowing cost slipped back below 5% to 4.94%, while the equivalent US Treasury yield stood at 4.99%. S&P 500 futures were up 0.32% after the index fell 0.52% on Friday.
The Stoxx 600 rose 0.39% in early trading and the FTSE 100 was 0.5% higher before lunch. Asian markets were more subdued, with South Korea’s KOSPI down 1.46% and Japan’s Nikkei 225 falling 0.8%; India’s Nifty 50 gained 0.52%, while China’s CSI 300 was broadly flat.
Oil remained a source of pressure, with Brent crude trading at $114 a barrel. Bitcoin also weakened, falling to $80,440.
Tech losses mask broader market gains
The heavy weighting of technology companies in major US indices has made recent falls appear broader than they were. On Thursday, 337 S&P 500 companies rose even as the index dropped 1.21% and the technology-focused Nasdaq fell 2.9%.
The equal-weighted version of the S&P 500 rose on the day. Deutsche Bank’s Jim Reid said it was the second-worst performance on record, since 1996, among sessions in which at least 300 S&P 500 stocks gained.
The only weaker example came on 27 January 2025, when the index fell 1.46% despite 351 companies rising. That was the day DeepSeek challenged assumptions about the need for costly artificial intelligence investment, sending Nvidia shares down 17%, Reid told clients.
AI spending raises fresh funding concerns
Investors have been questioning whether artificial intelligence shares have become a bubble, while executives in the sector are warning that the bigger problem may be securing enough money to fund planned expansion.
Meta shares fell after its results call when the company disclosed that its AI capital spending had pushed it into negative free cash flow. It also increased its forecast for capital expenditure for the rest of the year.
In a regulatory filing, Meta warned that financing might not be available on favourable terms, or at all. Oracle, OpenAI, Alphabet and SpaceX are among the companies seeking to raise hundreds of billions of dollars through debt or equity, intensifying competition for capital.
Ed Yardeni and Elias Griepentrog of Yardeni Research said investors had interpreted the financing activity as a sign that even the largest technology companies might be trying to secure funding before competitors took up the available capital. They questioned whether enough money existed to support all the sector’s ambitious AI spending plans.
Yardeni said Broadcom chief executive Hock Tan, BlackRock chief executive Larry Fink and Nvidia chief executive Jensen Huang had all recently warned that there might not be enough money to go around.
Retail investors buy into volatility
Despite the concerns, leveraged exchange-traded funds have continued to attract aggressive retail investors seeking the diversification of an ETF alongside the potential returns associated with day trading.
Wells Fargo tracked 546 leveraged ETFs in the US, with combined assets of $160 billion, and found that leveraged retail buyers consistently purchased during market falls. Such products use borrowed money to magnify both gains and losses.
For longer-term savers, broad-market ETFs remain the usual approach because most individual stock-pickers fail to outperform the market. Vanguard founder Jack Bogle summarised that philosophy as: “Don’t look for the needle in the haystack. Just buy the haystack!”
Attention now turns to quarterly results from Alphabet and Microsoft on Wednesday and Amazon on Thursday. The Federal Reserve is also due to decide on interest rates on Wednesday, with futures markets pricing in a hold at 3.75%.
