The AI boom is experiencing turbulence as Asian tech giants like Samsung and SK Hynix face significant sell-offs, triggering market circuit breakers. This downturn, partly influenced by Nvidia’s stock dip following reports of talks with OpenAI for a massive AI infrastructure backstop, has seen Apple reclaim its status as the world’s most valuable company.
Meanwhile, LVMH reported solid luxury sales driven by watches and jewelry, while France and Spain grapple with severe wildfires exacerbated by an incoming heatwave. Oil prices have continued to decline on hopes of de-escalation between the U.S. and Iran.
AI Boom Cools: Asian Tech Stocks Plunge, Nvidia Sells Off, Apple Regains Top Spot
By Leonie Kidd, from London
The artificial intelligence investment frenzy is showing signs of strain, with significant sell-offs across Asia's leading tech firms. This downturn, fueled by jitters in the AI trade and a notable dip in Nvidia's stock, has led to market circuit breakers being triggered and has allowed Apple to reclaim its position as the world's most valuable company.
The Nasdaq-South Korea feedback loop is once again dictating market sentiment, this time to the downside. Heavy selling has gripped Asia's biggest tech firms, signaling increasing nervousness around the highly sought-after AI trade.
What You Need to Know Today
The velocity of the AI sell-off is accelerating. Tuesday's trading in Asia witnessed steep declines in Samsung and SK Hynix, contributing to a 10% drop on South Korea's Kospi index. The Kospi has now fallen approximately 45% from its June highs, with circuit breakers being triggered repeatedly.
Contagion spread across the region, leading to significant drops in the Nikkei, particularly among major tech players. While the exact catalyst remains elusive, a report on Monday's Wall Street session indicated that Nvidia faced selling pressure after CNBC confirmed discussions between Nvidia and OpenAI regarding a potential $250 billion backstop for its AI infrastructure plans.
This news sent Nvidia shares down over 5%, reducing its market capitalization to just under $4.8 trillion. Consequently, Apple was able to regain its status as the world's most valuable company, boasting a market cap of $4.95 trillion.
Banking on Jewellery
French luxury conglomerate LVMH reported robust demand from U.S. consumers, defying a slowdown in sales and spending observed in Europe and China. The owner of iconic brands like Louis Vuitton, Dior, and Moët & Chandon champagne saw its second-quarter sales increase by 3%.
The watches and jewellery segment emerged as the fastest-growing category. According to Bernstein's luxury analyst Luca Solca, speaking on CNBC's "Europe Early Edition," jewellery appears to be perceived as a better value proposition by middle-class consumers.
Bracing for the Heatwave
France and Spain are preparing for another intense heatwave, which risks exacerbating the wildfires that continue to rage across significant parts of both nations. French President Emmanuel Macron described the battle against the blazes as the "toughest fight since the Second World War."
Throughout Monday, more regions in both France and Spain underwent evacuations as firefighters worked tirelessly to prevent the fires from reaching major urban centers. With temperatures expected to rise again from Wednesday onwards in the most affected areas, containment efforts are likely to become increasingly challenging.
Crude Comedown
Oil prices continued their downward trend on Tuesday. Hopes for de-escalation have been bolstered by a pause in fighting and ongoing negotiations between the U.S. and Iran. These movements in crude oil prices are influencing expectations for Federal Reserve Chairman Kevin Warsh's upcoming policy meeting, which commenced on Tuesday.
Traders on the Kalshi exchange anticipate a high probability of Warsh mentioning "oil" during his press conference on Wednesday, with over 50% odds that the term "shock" will also be used.
And Finally...
SpaceX has seen its market capitalization shrink by the equivalent of a full Tesla. Since its peak in June, SpaceX has erased over $1.2 trillion in market value. On Monday, the stock declined for the 13th time in 16 sessions, closing down more than 1% at $113.50. Despite some balancing of options flows, the largest trades on Monday were neutral to bullish, with small speculators continuing to buy call options that rely on a rapid stock turnaround.
