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Shares Drop in US and Asia as AI Stocks Slide, Led by Major Tech Firms

Author

Alicia Shapiro
July 25, 2024 • Estimated Reading Time: 3 minutes

A visual representation of a declining stock market on Wall Street with stock prices falling sharply. The image features stock graphs with downward trends and logos of major companies such as Nvidia, Alphabet, Microsoft, Apple, and Tesla. The background includes a depiction of Wall Street with stock tickers and financial charts, highlighting the significant drops in major indices like the S&P 500, Nasdaq, and Dow Jones Industrial Average

Shares Drop in US and Asia as AI Stocks Slide, Led by Major Tech Firms

Financial markets in the US and Asia experienced sharp declines as investors sold off shares in technology companies, with artificial intelligence (AI) stocks particularly affected. In Wednesday's trading in New York, the S&P 500 lost 2.3%, and the tech-heavy Nasdaq fell 3.6%, marking their biggest one-day falls since 2022. The Dow Jones Industrial Average dropped by 1.2%.

Impact on Key Tech Companies

The losses were driven by major firms, including Nvidia, Alphabet, Microsoft, Apple, and Tesla. Nvidia, a leading AI chip manufacturer, saw its shares drop 6.8% and has lost about 15% of its value in the last two weeks. The company is set to report financial results at the end of August.

Tesla and Alphabet Stocks

Shares in Tesla, owned by multi-billionaire Elon Musk, fell by more than 12% after its latest financial results disappointed investors. Alphabet, the parent company of Google and YouTube, saw its stock price drop by 5%. Despite reporting financial results that beat analyst expectations, Alphabet indicated that its spending would remain high for the rest of 2024. Like many of its competitors, Alphabet has invested billions into AI technology development and adoption.

Asian Stock Market Reactions

On Thursday, Japan's Nikkei index led declines in Asia, falling by more than 3%. Major chip makers, including Renesas Electronics and Tokyo Electron in Japan and South Korea's SK Hynix, were among the significant fallers.

Investor Concerns and Future Outlook

Jun Bei Liu, Portfolio Manager at Tribeca Investment Partners, noted that investors are becoming more concerned about high expenditures in AI without immediate revenue benefits. "I don’t think this will mark the start of the disbelief in AI... it just simply means investors will focus more on returns in this space than just buying the whole sector," she said.

Other Contributing Factors

Investors are also cautious due to major surprises in the US presidential election campaign and uncertainty about the timing of an interest rate cut by the US central bank.