Global Tech Stock Selloff: Is the AI Boom Nearing Its End?

Tech stocks under pressure: Concerns about the sustainability of demand for AI infrastructure and high investment costs intensified the selloff in technology and chip stocks. Asian markets slump: South Korea's KOSPI fell nearly 8% and Japan's Nikkei dropped about 5%. CoreWeave shares fall: Shares of this operator […]

Tech stocks under pressure: Worries about the sustainability of demand for AI infrastructure and high investment costs fueled a sell-off in tech and chip stocks.

Fall of Asian markets: South Korea's Caspian index fell by nearly 8% and Japan's Nikkei fell by about 5%.

CoreWeave shares fell: Shares of the data center operator fell another 1.8 percent after falling 15 percent on Wednesday.

The world stock markets faced a limited decline on Thursday (October 23); As worries about the costs of investing in artificial intelligence and rising interest rates fueled a sell-off in shares of technology companies and chip makers.

The valuation of companies active in the artificial intelligence ecosystem has worried investors; Especially since more market participants express doubts about the sustainability of demand for data centers.

On Wall Street, the technology-focused Nasdaq index fell, and the Philadelphia Stock Exchange's semiconductor index was down 2 percent in late trading. On the other hand, the S&P 500 benchmark index compensated the losses at the beginning of the trading session and entered the positive range with the leading shares of health and raw materials companies. The Dow Jones index also increased by 1 percent.

Shares of CoreWeave, the debt-laden data center operator at the center of a recent wave of concerns about artificial intelligence, fell another 1.8 percent after falling 15 percent on Wednesday.

A strong sell-off led by tech stocks also weighed on Asian markets. South Korea's Caspian index, which has been one of the main beneficiaries of optimism surrounding artificial intelligence due to the presence of major chip companies, fell nearly 8 percent. Japan's Nikkei 225 index also fell by almost 5 percent.

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Rong Ren Guo, portfolio manager at Eastspring Investments, said: "In my opinion, the wave of selling reflects investors' caution towards the more vulnerable part of the artificial intelligence ecosystem; Especially in a situation where senior executives of technology companies support slowing down the development of advanced AI models.

He added: "The markets are more skeptical about the stability of the demand for processing capacity and its future path than before." The increase in financing costs has also intensified these concerns; Because the expected rate of return for investing in AI infrastructure projects, which require huge capital, is increasing.

MSCI's broadest index of Asia-Pacific shares, excluding Japan, closed down 3.04 percent, its biggest daily decline since late July. MSCI global stock index also decreased by 0.19%.

On the other hand, the European stock markets made up for the initial losses and closed 0.33% higher at the end of the day.

The yield on the 10-year US Treasury bond retreated to the 5% level. This decrease was the biggest daily drop in the yield of these bonds in more than a year.

The producer price index (PPI) in the United States in September recorded its highest increase in the last four and a half years; Because the cost of goods and services has increased. This shows that inflationary pressures are spreading to sectors beyond energy.

New US retail sales data also showed sales rose more than expected last month. Gasoline price growth was one of the factors behind the increase, but the data also indicated that consumer spending in other sectors remained moderate.

The yield of 10-year US Treasury bonds decreased by 10.29 basis points and reached 5.087%.

US inflation data released on Wednesday once again changed market expectations about the future path of the Federal Reserve's interest rates. For a while, traders considered the probability of an interest rate increase in the current session almost equal to the probability of it remaining unchanged, but then reduced the amount of these bets.

According to CME Group's FedWatch tool, Federal Reserve interest rate futures now show a 73% chance that interest rates will remain unchanged at the end of the central bank's next two-day meeting on October 28. This figure has not changed much since the beginning of the week.

In the foreign exchange market, the dollar retreated from its 18-month high.

In the energy market, Brent crude oil recovered part of its previous decline and rose 0.2% to $106.35 per barrel.

Traders are evaluating the impact of easing US sanctions restrictions on oil supply against the consequences of attacks on ships passing through the Strait of Hormuz.