Global stock markets fell sharply on Wednesday amid mounting concerns that the artificial intelligence boom has driven valuations too high, with more than $500 billion (£384 billion) wiped from the value of leading AI chipmakers.
Japan and South Korea’s tech-heavy markets led the declines, each dropping more than 2%, following a heavy sell-off on Wall Street overnight. At one point, Tokyo’s Nikkei was down nearly 7% from Tuesday’s record highs, as investors questioned whether equity prices had become unsustainably stretched.
Senior Wall Street figures added to the caution. The chief executives of Goldman Sachs and Morgan Stanley both warned that a market correction could occur within the next one to two years. Meanwhile, reports that Michael Burry, the investor portrayed in The Big Short, has placed major bets against Palantir and Nvidia further rattled confidence.
Jim Reid, analyst at Deutsche Bank, said:
“The market narrative saw a discernible shift, with a growing chorus discussing whether we might be on the verge of an equity correction.”
In Europe, the FTSE 100 edged lower but fared better than the CAC 40 in France and Germany’s DAX, which were more heavily exposed to the tech sector.
In Asia, Nvidia supplier Advantest tumbled as much as 10.2%, while Taiwan Semiconductor Manufacturing Co (TSMC) dropped 3%, helping erase around $500 billion from two major semiconductor indexes.
The moves came after Palantir sank nearly 8% on Tuesday, as its third-quarter forecasts disappointed investors expecting stronger growth from the AI leader.
Deutsche Bank’s Reid cautioned that markets had become overly concentrated in Big Tech, noting that the so-called “Magnificent Seven” — including Nvidia, Microsoft, and Tesla — have climbed about 45% over the past year, compared with just 5% for the equal-weighted S&P 500, highlighting the imbalance driving current valuations.
