Chip sell-off deepens as geopolitical tensions weigh on global markets

Market Commentary

US equities closed lower on Friday as a renewed sell-off in semiconductor shares and escalating geopolitical tensions weighed on investor sentiment. The S&P 500 declined 1%, the Nasdaq fell 1.50%, and the Dow Jones Industrial Average retreated 407 points. Concerns that artificial intelligence (AI) hyperscalers could scale back infrastructure spending continued to pressure chipmakers, with Nvidia down 2.20%, AMD and Intel each losing around 2%, and Broadcom falling 1%. Netflix also dropped 7.30% after forecasting another quarter of slower sales growth.

The US dollar strengthened as investors sought safer assets amid renewed trade and geopolitical uncertainty. President Donald Trump's claims that China interfered in the 2020 US presidential election raised concerns over the durability of the trade truce between the world's two largest economies, while the conflict in the Middle East continued to support higher energy prices. Although softer inflation data and lower inflation expectations supported Treasury prices, Federal Reserve officials maintained that persistent core inflation could still warrant an interest rate hike later this year.

European markets also ended lower as weakness in technology shares spread globally. The Euro STOXX 50 fell 1.10% and the STOXX Europe 600 declined 0.40%, with AI-related companies remaining under pressure following concerns over infrastructure spending and advances by Chinese AI developer Moonshot. ASML lost 3.90% and Siemens declined 2.30%, while banks weakened as higher energy prices clouded the credit outlook. London's FTSE 100 outperformed its European peers, rising to 10 600 as gains in defensive sectors and energy shares, including Shell and BP, offset losses in mining, luxury goods and financial stocks.

Asian markets recorded broad-based losses as technology shares extended their recent decline. China's Shanghai Composite dropped 3.05% to a near eleven-month low, while the Shenzhen Component fell 5.40% as concerns over liquidity intensified following plans for several large technology listings. In Japan, the Nikkei 225 plunged 4.03%, with semiconductor and AI-related companies leading declines as investors remained concerned about elevated valuations, slowing AI investment and the inflationary risks associated with higher oil prices.

South African equities ended lower on Friday. The FTSE/JSE All Share Index declined 0.70%, while the JSE Top 40 slipped 0.75%. Industrial shares led the losses, with the Industrial 25 Index falling 1.11%, while the Resource 10 Index declined 0.67% and the Metals and Mining Index shed 0.66%. Financial shares also ended weaker, with the Financial 15 Index down 0.36%. The rand weakened against the major currencies during the session. It traded at R16.52 against the US dollar, R22.22 against the British pound and R18.90 against the euro.

Commodity markets were mixed. Brent crude oil climbed 4.86% to $88.32 per barrel. Gold rose 1.19% to $4 017.24 per ounce and silver gained 0.77% to $55.93 per ounce, while platinum declined 2.40% to $1 603.15 per ounce.