World stocks fell to a one-month low yesterday, as investors dumped chipmakers across the globe on concerns about Chinese competition and funding of the AI boom, while the possibility of a US interest rate hike as early as this week further dampened the mood.
The tech-heavy Nasdaq composite fell 1.37 per cent yesterday and chip majors weakened, with Micron sliding 11.7pc, Nvidia dropping 1.7pc and Intel shedding 8.5pc.
Asian chipmakers were at the heart of yesterday’s selloff, with South Korea’s KOSPI diving more than 10pc to a three-month low, triggering a circuit breaker on the way down as it heads for its largest monthly fall on record, surpassing declines suffered during the Asian financial crisis in 1997.
The index had more than tripled in value over the 12 months to June, but it has shed more than a third of its value since that peak.
Shares in memory chipmakers SK Hynix and Samsung Electronics, which are under extra pressure in a market transformed by leverage, shed more than 12pc as their stratospheric rally unwinds in a hurry.
The MSCI All Country World Price index fell 0.76pc to its lowest since June 26. After a stellar rally this year, AI-linked stocks have been met with several bouts of selling in recent weeks as investors worry about stretched valuations and circular funding in the sector. The latest rout came after a report that China had begun manufacturing domestically developed immersion deep ultraviolet (DUV) lithography machines, while Chinese chipmaker CXMT’s strong stock-market debut on Monday fuelled concerns about increased competition in the memory chip industry.
“You’ve seen the companies paying for AI, the hyperscalers, not really participating because of concerns about the cost and the degree of leverage that needs to be taken on. And now we’re seeing questions over the profitability of the semiconductor space, particularly in Asia,” said Dorian Carrell, head of multi-asset income at Schroders.
“The broader AI story has some way to go, but these kinds of (profit) growth rates are rarely sustained. We think that it’s healthy that the market’s questioning these things.”
Some positive earnings reports from companies including Unilever and Mercedes-Benz, nonetheless helped European stocks outperform.
Earnings this week from ‘Magnificent Seven’ members Microsoft, Amazon, Meta and Apple , also among companies that splurge the most on AI, will be seen as a key test of the market rally, particularly after Alphabet and Tesla spooked investors last week with negative cash flow reports.
&uuid=(email))