Global tech stocks bleed as investors weigh AI risks, Fed's hawkish stance
Seoul, June 23
Stocks in Asia closed lower as the tech rout spread from Wall Street with the Korean index KOSPI closing down 10 per cent and Japan's Nikkei ending the trading session on Tuesday down nearly 3.5 per cent.
Korean semiconductor heavyweights SK Hynix and Samsung fell more than 12 per cent on Tuesday as investors come to terms with lofty AI valuations and the rising costs associated with its deployment. Memory chips have become costly as their demand has picked up exponentially following the AI boom.
Wall Street's marquee tech names, including Alphabet, Meta, Amazon and Microsoft, fell on Monday as the investor sentiment remained cautious with a hawkish Federal Reserve stance raising the likelihood of rate hikes this year.
Elon Musk-led SpaceX was down 16 per cent on Monday, taking the rocket-to-AI company's valuation down to USD2 trillion. The stock has lost momentum in the last few trading sessions after a blockbuster debut. SpaceX also announced its maiden bond offering, planning to raise funds to be used for bridge financing and financing its massive AI ambitions.
The European stocks were also lower on Tuesday, with the Stoxx 600 declining more than 1 per cent as the tech rout spread to the European indices. European chipmakers Infineon and STMicroelectronics were down 5.7 per cent and 7.5 per cent, respectively. Another heavyweight stock, Dutch Chip equipment maker ASML, was down more than 5 per cent.
The massive rally in AI-related stocks saw shares of many tech companies zoom to record highs in the current quarter. Korea's SK Hynix and Samsung, along with America's Micron, entered the trillion-dollar club valuation on the back of blistering demand for their high-bandwidth memory chips (HBMs).
The selloff witnessed in tech stocks is emblematic of the risks associated with the AI boom as investors assess the costs of deploying AI models, with many companies reporting exhausting their yearly budgets in just a few months on frontier models.
Apple's Tim Cook, speaking to the Wall Street Journal earlier, had said that a price hike looks imminent on the back of rising prices of memory chips.
The massive AI buildout has seen companies spending hundreds of billions of dollars on capital expenditure to make data centres capable of training large language models.
Stocks also suffered on account of a hawkish stance by the US Federal Reserve, even as inflation fears receded over the reopening of the critical Strait of Hormuz after the US and Iran successfully concluded the first round of negotiations in Switzerland and the US eased sanctions on Iran.
— ANI
Reader Comments
Fed's hawkish stance is a reminder that the global economy is still fragile. While our Indian markets have been relatively stable, we can't ignore the ripple effects. The real concern is how this affects startups in Bengaluru and Hyderabad depending on foreign funding. Bahut risky hai yeh sab! 😬
Honestly, this AI bubble bursting was overdue. Companies spending their entire budgets on frontier models in months isn't sustainable. As an investor, I've shifted focus to Indian pharma and FMCG—steady returns without the hype. Let the West chase these risky bets while we build solid fundamentals. 🇮🇳
It's interesting how the reopening of the Strait of Hormuz and easing Iran sanctions are mentioned after the selloff. Geopolitics and tech are so intertwined now. However, I feel the article glosses over how emerging markets like India could actually benefit from a rotation out of overvalued US tech stocks. Just my two cents. 🤔
Tim Cook hinting at price hikes is concerning—our iPhone prices are already inflated compared to the US. Wish our government would push for more local assembly to reduce import dependency. On the bright side, if chip demand normalizes, maybe Indian manufacturers can step up. Abhi wait and watch karo. 📉
As someone who tracks global markets, this selloff is a healthy correction. However, I think the article could have included more analysis on how India's Nifty 50 might react. The AI narrative is powerful but overhyped—expect more volatility in the next quarter. Keep some cash ready for buying opportunities.
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