“AI panic on Wall Street,” writes major bank SEB in its morning letter to clients.
Panic selling has continued, with sharp falls in the same sector on the stock exchanges in Tokyo, Seoul and Taiwan. Shares such as SoftBank, Samsung and SK Hynix have fallen sharply. The downturn has also continued on European exchanges, including the Stockholm Stock Exchange.
“An escalating AI craze, which broadened to the entire market, resulted in a total risk-off,” writes Mattias Isakson, chief strategist at Swedbank, in a comment to TT.
“It can change quickly”
He explains the rapid decline by saying there are many sellers and few buyers, with falling prices prompting further falls - like a self-propelled machine.
“The fact that the movements were so large may also be due to forced sales and positioning among larger players such as hedge funds, CTA flows and more, where market movements create new market movements,” he writes in a comment to TT.
“However, that can change quickly, and at the moment, US futures indicate a positive opening,” he adds.
But Isakson and his staff will follow developments “extra carefully” in the coming days. He does not rule out Swedbank advising customers to reduce their exposure to stocks in their savings.
At the epicentre of the AI panic - driven by the market reassessing the tech sector amid expectations of reduced AI investment after the Democrats’ election rout in the US this week - are companies such as chipmaker Nvidia, whose shares plunged 9.3 percent on Thursday.
A few weeks after a historic peak
It was even worse for competitors Micron Technology and Advanced Micro Devices, whose shares fell 17 percent each on Thursday. On the Taiwan Stock Exchange, semiconductor giant TSMC was also hit hard in Friday trading, falling 11 percent.
Investors fear that the peak of AI investment is behind us, Charles-Henry Monchau, chief investment officer at Swiss bank Syz Group, told the Financial Times.
The world’s richest man, Elon Musk, has also taken a hit, with shares in AI and space company SpaceX down 9 percent and shares in electric carmaker Tesla down 11 percent.
The tech stock plunge comes just weeks after the same stocks lifted Wall Street’s leading indexes to new all-time highs.
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