Technology shares slide as AI spending concerns rattle markets

US equities fell on Thursday as concerns over the scale and potential returns of artificial intelligence (AI) investment triggered a sell-off in technology shares. The Nasdaq Composite fell 2.68% to 25 988.10, while the S&P 500 lost 1.41% to 7 647.74 and the Dow Jones Industrial Average inched 0.20% lower to 52 749.70. The Philadelphia Semiconductor Index dropped 6.30%, with several chipmakers losing more than 7%. Meta Platforms fell 7.50% despite beating earnings expectations, as its AI-related expenditure raised concerns about cash flow. Tesla declined 2.10%. However, Procter & Gamble gained 6% after beating estimates, while Spotify advanced 10.70% on a stronger-than-expected profit outlook. Rising oil prices and concerns about renewed Middle East tensions also heightened inflation worries, with markets pricing in the possibility of a further 25-basis-point Federal Reserve rate increase before year-end.

European equities also weakened, with the Stoxx 600 falling 1% and the Euro Stoxx 50 declining around 2%. Rising oil prices, geopolitical tensions and concerns about the returns from AI infrastructure spending weighed on sentiment. Germany’s DAX fell approximately 1.10% to 25 372, while France’s CAC 40 declined 1.40% to 7 811. Technology, banking and industrial shares came under pressure, although SAP gained after raising its full-year outlook. In the UK, the FTSE 100 recorded smaller losses than its continental peers, as gains in pharmaceutical and consumer stocks partly offset weakness in banks and mining shares.

Asian markets were broadly lower as concerns about AI investment returns spread across technology shares. Japan’s Nikkei 225 fell 2.65% to 62 908, with SoftBank Group, Tokyo Electron and other technology-related stocks among the notable decliners. China’s Shanghai Composite lost 1.50% to 3 658, while Hong Kong’s Hang Seng Index dropped around 3%, extending the region’s technology-led sell-off. Weakness in Chinese technology shares and heightened geopolitical tensions added to pressure on sentiment.

South African equities also ended lower. The JSE All Share Index declined 1.03% to 108 525.49, while the Top 40 fell 1.18%. Resources lost 3.18% and Metals and Mining declined 3.81%, while financials slipped 0.23%. Industrials edged up 0.05%. The rand weakened against the major currencies, with the US dollar rising 0.79% to R16.50, the pound gaining 0.85% to R22.12 and the euro advancing 0.69% to R18.52.

At 19h25 SAST, Brent crude rose 3.34% to US$112.45 a barrel amid concerns about escalating Middle East tensions. At 20h19 SAST, gold fell 2.42% to US$4 040.21 an ounce, silver declined 5.26% to US$54.92 and platinum lost 3.56% to US$1 577.65.