US tech stocks suffered their sharpest fall in months as investors questioned whether companies’ huge spending on artificial intelligence can be sustained. The tech-heavy Nasdaq Composite dropped 2.6% on Thursday, while the broader S&P 500 fell 1.21%.
The Nasdaq’s decline was its steepest since a 4.2% drop on June 5. The S&P 500 recorded its biggest fall since July 29, when it declined 1.52%.
Six of the so-called Magnificent Seven companies fell heavily, with Meta among the worst performers. Its shares dropped almost 7% after the Facebook owner raised its forecast for capital spending this year to between $135 billion and $145 billion, while reporting a net profit below expectations.
Amazon fell 4.6%, Nvidia lost 4.4%, and Tesla and Alphabet each declined 3.1%. Microsoft was down 2.2%, while Apple was the only member of the group to rise, gaining 1.2%.
The sell-off spread across the technology sector. Intel and Advanced Micro Devices both fell by about 8%, while Broadcom declined 4.3%.
The companies, which together account for more than a third of the overall market, have helped drive a surge of investment in artificial intelligence. That spending has also fuelled growing debate over whether the sector is entering a bubble reminiscent of the period before the dot-com crash in 2000.
Some Wall Street analysts have questioned whether current investment in datacentres and graphics processing units can continue at its present pace. Others argue that the potential impact of artificial intelligence on society justifies the sums being committed.
Jay Goldberg, a senior analyst at Seaport Research Partners in San Francisco, said the market movements appeared to reflect sentiment more than a fundamental shift.
“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,” Mr Goldberg said.
He added: “There are legitimate concerns about the AI trade, but this level of shift in the markets is driven much more by investor sentiment than any tangible reason.”
Asian markets follow US tech stocks lower
Shares in Asia opened lower on Friday after the Wall Street losses. Japan’s Nikkei 225 fell by more than 2% in morning trading before recovering some ground, while South Korea’s KOSPI dropped as much as 3.5%.
Hong Kong’s Hang Seng Index fell by about 0.5%.
Rising oil prices added to the subdued mood. Brent crude futures gained 4% on Thursday and continued to rise on Friday morning, moving above $114.20 a barrel, their highest level since May, amid fallout from the US-Israel war on Iran.
Global investment in artificial intelligence is forecast to reach $2.7 trillion in 2026 and $3.6 trillion in 2027, according to technology insights company Gartner.
