The US stock market sank on Friday in a “bloodbath” for companies linked to the AI boom.
Shares on Wall Street fell heavily in the wake of sharp downturns in Japan and Taiwan as investors raised questions about the soaring valuations of companies tied to the technology.
Chip manufacturers were hit hardest after a blistering rally earlier in the year driven by surging demand.
The Nasdaq Composite, which is dominated by tech companies, plunged by 1.9pc in its sharpest fall in a month.
Kei Okamura, portfolio manager at financial adviser Neuberger Berman, said: “The word ‘bloodbath’ is accurate because it is across the board.”
Japan’s benchmark Nikkei 225 sank 4pc on Friday, having declined more than 10pc since its record high on June 25.
Taiwan’s Taiex index had shed 6.5pc after $2tn chip giant TSMC fell by 7.3pc a day after announcing record second-quarter profit but higher than expected spending plans.
Jim Reid, an analyst at Deutsche Bank, said: “Global equities are continuing to slump, as fresh doubts about the AI trade have driven a pronounced sell-off in tech stocks.”
Mr Reid said there had been no single trigger for the downturn, which came as the world’s biggest technology companies prepared to report their second quarter results.
Tech stocks in Hong Kong were hit hard by Chinese AI start-up Moonshot, which on Friday unveiled a new large language model able to perform close to the levels of tools from US giant Anthropic.
The Beijing-based company unveiled Kimi K3, which it described as the world’s largest open AI model by parameter count, an indicator of its complexity.
Lian Jye Su, an industry analyst, said Chinese models were gaining traction because they could be deployed far more cheaply than leading US systems.
“They can be run at a fraction of the cost that OpenAI charges its clients,” he said.
Markets have also come under pressure from the renewed hostilities in the Middle East, which have sent oil prices soaring more than 15pc this month to over $85 a barrel.
France blocks access to prediction betting website Polymarket
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French regulators have told internet companies to block public access to the Polymarket betting website, over concerns that some bets could be manipulated and that gamblers could be exposed to heavy losses.
In a notice posted on its website, France National Gambling Authority said it had asked for Polymarket to be banned, claiming the site “is promoting an illegal gambling and betting offering”.
Prediction markets such as Kalshi and Polymarket allow traders to buy and sell binary “yes” or “no” contracts on the outcome of virtually any event from foreign interventions to football games and elections.
The rise of such websites has led to growing calls for more stringent regulation and suggestions that some bets should be banned entirely. In May, the Spanish government temporarily banned Polymarket and Kalshi from operating in the country.
Chip stocks enter bear market territory
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A closely-watched index of microchip stocks is set to fall into bear market territory.
The Philadelphia Semiconductor Index fell by as much as 5.7% Friday, in a reversal of the surge that saw the index more than double in just three months.
The sell-off fuelled a continuation of a more than 20pc fall in the Philadelphia Semiconductor Index since it hit all-time highs in June. The term “bear market” refers to situations in which stocks fall by over 20pc.
The index, which includes 30 major chip stocks, had soared 105% this year, from long-time lows in March to the record highs last month.
However, shares in some of America’s biggest microchip makers have all plunged sharply since June, putting the index in bear market territory.
Shares in chip giants including Marvell Technology Inc., ARM Holdings Plc, and Intel Corp. have all plunged more than 30% over the past month.
Chip stock sell-off intensifies
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A selloff in chipmakers gathered pace on Friday on worries that the artificial-intelligence spending spree is becoming harder to justify.
A breakthrough from Chinese AI startup Moonshot further dented enthusiasm for the sector as mounting geopolitical tensions have also led to lower appetite for risk.
On Friday, it contributed to a 1.7pc drop in the Nasdaq 100 index, which is dominated by technology companies.
Chip stocks had recently achieved their best-ever quarter, extending an extraordinary surge driven by insatiable demand for new AI technologies.
However, the industry has faced turbulence on concerns about increased competition, possible overcapacity and whether the billions of dollars in investments will pay off.
It has fuelled concerns that microchip stocks could be entering a bear market.
David Morrison at Trade Nation said: “The question now is whether this will become yet another ‘buy the dip’ opportunity, or if the pace of selling accelerates as everyone rushes to the exit doors at the same time.”
Apple shielded from worst of tech sell-off
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A few months ago it seemed unlikely Apple would reclaim its top spot as the world’s most valuable company any time soon.
The company has increasingly been viewed as a laggard on AI. Its Apple Intelligence technology has underwhelmed customers and its smartphones risk being overtaken by new AI gadgets from upstarts like OpenAI.
But it has largely been shielded from this week’s sell-off of tech stocks.
The Cupertino giant is increasingly seen as a safe haven versus other more volatile AI chip stocks. It has refused to pile in on the multi-trillion dollar spending spree for AI data centres, unlike rival tech giants.
While chip stocks have soared this year, they are highly exposed to any slowdown in AI demand. Nvidia has dipped more than 2pc this week, while other smaller chip businesses have endured double-digit sell-offs.
Apple has also shown it believes that its customers are willing to pay higher prices for its gadgets as the cost of memory chips soar - again down to AI. It raised its prices earlier this year, meaning it will not shoulder the cost itself of higher prices for tech components.
All this means that Apple’s stock has risen steadily 23pc so far this year, even as other tech companies have swung wildly on the hopes and fears of the AI boom.
Netflix ‘punished’ as it scales back viewing data
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It is not just semiconductor stocks being hit hard.
Netflix has fallen nearly 9pc after it forecast another quarter of slower revenue growth.
The streaming giant is also reducing the amount of data it is going to put out about viewer numbers.
It has cut the frequency of its viewing-hours report to once a year from twice starting 2027.
It comes after it scrapped its subscriber counts last year, leaving investors in the dark as the business faces greater competition from traditional media as well as YouTube.
Ben Barringer, an analyst at Quilter Cheviot, said: “Whenever you take away a data point from investors when results aren’t as good as they have been you will get punished by the market.”
Netflix has fallen 44pc since hitting an all-time high in June last year, despite strong content like the final season of sci-fi hit “Stranger Things” and South Korean drama “Squid Games”.
SpaceX on track to lose $1 trillion
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Elon Musk’s SpaceX is on track to have lost more than $1 trillion in market value from its record high after a little over a month as a public company.
The rocket maker’s stock fell as much as 6.9pc on Friday to $122 a share, giving it a market capitalisation of $1.61 trillion.
Its valuation hit $2.64 trillion on its third day of trading, with its shares rising as high as $225 at their peak.
However, it is now trading below its IPO offer price of $135.
Apple overtakes Nvidia as world’s largest company
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Apple has regained its crown as the world’s most valuable company from Nvidia after the AI chipmaker was swept up in the tech sell-off.
The iPhone maker, which has been accused of being slow to capitalise on the shift to AI, saw its shares rose 0.4pc on Wall Street in early trading on Friday, taking its valuation to $4.9 trillion (£3.6tn).
By contrast, Nvidia’s shares sank 3.7pc to send its valuation down to $4.8 trillion and dethroning it from its top global position, which it has held since May last year.
Investors are shifting away from chipmakers and major spenders on AI over concerns that the sector has become overvalued.
Apple shares have surged 23pc so far this year, making it the best performer among the so-called Magnificent Seven group of US tech giants.
Wall Street drops at the opening bell
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US stock markets plunged as trading got underway in New York amid a global sell-off in technology stocks.
The Nasdaq Composite, which is dominated by tech companies, sank 1.8pc to 25,415.05.
The Dow Jones Industrial Average fell 1pc to 52,031.55 while the benchmark S&P 500 declined 1.7pc to 7,447.30.
Markets in ‘much needed correction’
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Telegraph readers have lost count of how many times the AI market has gone into “meltdown” but describe the technology as a “game changer”.
Here are some of the views from the comments section below and you can join the debate here.
US stocks poised to fall
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Wall Street is bracing for tech stocks to be pummelled again following a downturn around the world.
Chip stocks were on track to fall for a second straight day, with Nvidia and Intel down 2.7pc and 2.8pc in premarket trading, respectively.
The Philadelphia SE Semiconductor index, a barometer of the sector, hit a nearly two-month low on Thursday and was set for its worst week since March last year. The gauge has shed more than 19pc from its late June record.
Strong results from TSMC, the world’s top advanced AI chipmaker, and ASML, the leading supplier of high-end chip-making equipment, have done little to ease concerns over the durability of the chip-stock rally.
In premarket trading, the tech-heavy Nasdaq 100 was down 1.9pc, the S&P 500 was down 0.9pc and the Dow Jones Industrial Average had fallen 0.7pc.