From 5h
ago
Introduction:
Global stocks tumble as AI panic grips markets
Good
morning, and welcome to our rolling coverage of business, the financial markets
and the world economy.
Fears that
the Democratic Party’s blue wave in this week’s midterm elections will sink the
AI investment boom are roiling markets, following heavy losses on Wall Street
last night.
Asia-Pacific
markets are a sea of red (unlike the US election map on Tuesday night!), as
investors ditch tech stocks after more than $3.2tn was wiped off the US stock
market yesterday.
Today,
Japan’s Nikkei stock index has slumped by almost 6% – its worst drop
since April 7 2025 during the ‘liberation day’ tariff panic.
South
Korea’s KOSPI is down 6.7%, and Taiwan’s TAIEX has dropped by
4.5% in a broad rout.
Christopher
Forbes, head of Asia
and Middle East at CMC Markets, called the market action “a bit
of a disaster”, explaining (via Reuters):
“(Clients)
were long index, long stocks, and they all got carried out.
“All
night, all day – we had client margin calls, client complaints, ... because
it’s a very emotional thing, right? People are wedded to their positions and
views on a stock or outcome and you’re telling them, look, you’ve just lost
money.
“And it’s
not just a slap in terms of valuation. It’s basically a whole policy and
six-year structural shift that says we’re now going to pause, we’re now going
to cool AI, we’re now going to cool data centres, approvals and equity capital
markets.”
After months
of warnings that AI valuations were too high, and that the bubble might burst,
US investors dashed to the exits en masse yesterday. The Nasdaq tech
index slumped by 5.5%, while the Dow Jones Industrial Average
(DJIA) dropped 1,833.06 points, or 3.44%, and the S&P 500
lost 4.36%.
Memory chip
makers, who had been profiting from the AI boom, led the fallers – SanDisk
slumped 22% and both Micron and AMD lost 17% of their value.
Chip giant Nvidia
led the fallers on the DJIA, down over 9%.
Analysts
pointed to policy uncertainty as Democrats are more critical of data centres,
which could slow the rollout of AI investment – especially given
public opposition to the sector.
Kyle
Rodda, senior
financial market analyst at Capital.com, says it was a “brutal sell-off”
as fears about the future of the AI buildout gripped the markets.
The
tumble in tech stocks that took hold in the immediate aftermath of the US
midterm elections resumed as investors contemplated what a Democrat-controlled
Congress may mean for tech regulation and the overall AI boom.
The
regulatory and political risks arise at a time when the proverbial AI trade was
already on shakier foundations. Earnings season has been an overall
disappointment for the markets, with Magnificent Seven results so far
undershooting growth expectations and flashing warning signs that the pace of
AI spending is slowing down.
So, it could
be a ‘tin hats on’ day in the markets. Investors will also be watching the
latest US jobs report, for clues into the health of America’s labour market.
The agenda
- 7am GMT: Lloyds house price
index
- 9am GMT: UN’s FAO food price
index
- 1.30pm GMT: US non-farm payrolls
jobs report
- 3pm GMT: University of
Michigan’s US consumer confidence report
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