Global shares slip amid pullback from AI frenzy
Top News | 26 Jul 2024
Agencies and staff reporter
Global stocks, cryptocurrencies and gold fell, tracking an overnight rout on Wall Street, as investors began pulling back from the artificial intelligence frenzy and the anticipated US interest rate cut is seen as a sign of market correction.
In Asia, Hong Kong's Hang Seng Index tumbled 306 points, or 1.8 percent, to close at 17,004 points while the Shanghai Composite Index edged down 0.5 percent to a nearly six-month low.
In addition to tech shares like Meituan and Tencent declining 5.47 percent and 3.3 percent respectively, all banking shares fell too.
Other tech-heavy Asian bourses also fell.
Japan saw its Nikkei 225 Stock Average lose 3.3 percent, the most since June 2021, taking its drop to about 10 percent from an all-time peak hit just two weeks ago. South Korea's Kospi slid 1.7 percent, with chipmaker SK Hynix sliding the most in 20 months despite record-high quarterly sales.
European stocks slumped on the busiest day of the corporate earnings season following underwhelming reports from a slate of companies, including Gucci owner Kering and food and drink giant Nestle.
Crypto king Bitcoin dropped to US$64,000 (HK$499,200) amid a risk-off mood while Ether, the second-largest token, dropped as much as 7 percent to below US$3,200, failing to get a lift from this week's launch of the first batch of US exchange-traded funds tracking the currency.
Gold also traded 1 percent lower at US$2,372.74 per ounce.
The global selloff came after US stock indexes, including S&P 500 and Nasdaq, recorded their worst day since 2022 on Wednesday as tech giants Tesla and Alphabet disappointed with lackluster earnings, with shares tumbling 12 percent and 5 percent respectively.
"Where is the return on investment on all the AI infrastructure spending?" said Alec Young, chief investment strategist at Mapsignals.
"I think investors realize that the payoff is going to take time to materialize and hyperscalers' earnings are being hurt in the short term by how much they're spending on it."
As a result, traders are now paying more to protect against swings in tech. Options volatility on Nvidia rose to its highest level since mid-March and the premium for puts on Broadcom is at a three-month high.
Other traders, however, saw the moves as temporary.
"I don't think you're seeing anything other than some stocks that have done exceptionally well, with very solid year-to-date returns, seeing some profit-taking in the face of not getting a giant beat and raise out of Google," said Michael Sansoterra, chief investment officer at Silvant Capital Management.
