Global stock markets experienced a downturn on Friday, highlighted by a significant 4% decline in Tokyo's Nikkei 225 index. This drop was largely attributed to extensive sell-offs in the technology sector, particularly among computer chip manufacturers and companies linked to artificial intelligence.
Although South Korea's markets remained closed, shares in Taiwan plummeted by 6.5%. This decline came on the heels of Taiwan Semiconductor Manufacturing Company (TSMC), the leading global contract chip manufacturer, announcing an increase of $100 billion in investments for fabrication facilities in the U.S., leading to a 7.3% fall in TSMC's stock.
In early trading across Europe, Germany’s DAX index slipped 0.3% to 24,841.19, while France’s CAC 40 decreased by 0.4% to 8,346.09. In contrast, the FTSE 100 in the UK managed a slight gain, rising 0.4% to 10,615.71.
Futures for the S&P 500 and Dow Jones Industrial Average also indicated declines, with drops of 0.8% and 0.5% respectively. Stocks in the AI sector have faced ongoing pressure as concerns mount over inflated valuations and the sustainability of the increasing demand for memory and processing capabilities, casting doubt on whether AI will yield the anticipated profits and productivity improvements.
Simultaneously, oil prices saw a spike amid escalating conflicts in the Middle East. The U.S. intensified its airstrike operations against Iran, targeting infrastructure to exert pressure on Tehran to relax its control over the Strait of Hormuz.
In Asian markets, the Nikkei index fell to 64,141.12, occasionally nearing its lowest point in over a month, largely due to an 8.2% drop in shares of Tokyo Electron, a key player in chip manufacturing equipment. Advantest, another significant name in chip testing, fell 7.2%, while SoftBank Group's stock decreased by 9%.
The Hang Seng in Hong Kong dropped 2% to 24,505.38, and the Shanghai Composite Index fell by 3.1%, reaching its lowest level in almost 11 months. Australia’s S&P/ASX 200 also dipped 0.5% to settle at 8,796.70.
Stephen Innes from SPI Asset Management commented that investors are now cashing in on previous winners from the first half of the year, shifting their focus toward sectors that have lagged behind.
On Thursday, the S&P 500 experienced a modest decline of 0.5%, despite about 75% of the stocks within the index rising, as several large corporations reported earnings that surpassed analyst expectations. The Dow Jones Industrial Average slightly decreased by 0.2%, with the Nasdaq composite falling more sharply by 1.5%.
Notably, Nvidia's stock fell by 2.4%, contributing significantly to the index's weight. Other companies that have seen substantial gains from rising AI demand also retraced their progress. For instance, Micron Technology fell by 5.6%, reducing its yearly gain to below 199%, while SanDisk's stock tumbled by 12.6% but still reflects a remarkable 494% increase this year. Western Digital saw a decline of 9.2%, yet remains up by 171% for the year.
Oil prices surged, nearing their highest figures in a month, with concerns that the ongoing conflict with Iran might disrupt shipments through the vital Strait of Hormuz, affecting crude oil delivery from the Persian Gulf. Brent crude rose by 1.1% to $85.13 per barrel, while U.S. benchmark crude oil increased by 1.3% to $79.95 per barrel.
Economic reports from the U.S. released on Thursday presented a mixed picture. One report indicated that consumer spending at retail locations was lower than anticipated, while another showed a decrease in unemployment claims, suggesting strength in the job market. A third report revealed stronger-than-expected manufacturing activity in the mid-Atlantic region.
In currency exchanges on Friday morning, the U.S. dollar remained relatively stable at 162.38 Japanese yen, while the euro slightly dipped to $1.1440 from $1.1443.
