Global markets are grappling with an intensifying tech sell-off, sparked by escalating costs of AI infrastructure. S&P 500 futures are down, and Asian indices, notably South Korea’s Kospi, have experienced steep declines, with several tech giants like Apple and Microsoft facing significant losses. This market rotation out of tech into traditional sectors underscores a period of heightened volatility, while oil and precious metals also slid amidst geopolitical tensions and Federal Reserve rate hike expectations.
Global financial markets are experiencing significant turbulence, with S&P 500 futures pointing to further declines on Friday as a worldwide sell-off in technology stocks intensifies. Mounting concerns over the escalating costs associated with artificial intelligence infrastructure are driving this rotation out of tech and into more defensive sectors.
Early Friday trading saw S&P 500 futures dip 0.8%, while Nasdaq 100 futures plummeted 1.59%. Dow Jones Industrial Average futures also edged down by 0.2%, or 107 points.
This tech exodus continued from Thursday's session, which witnessed the Nasdaq Composite record its first four-day losing streak since February, closing down 0.46%. The S&P 500 narrowly avoided a similar fate, slipping just 0.01%. In contrast, a rotation into healthcare, financial, and industrial sectors provided a boost to the blue-chip Dow, which climbed 71.72 points, or 0.14%.
The impact was particularly severe across Asia-Pacific markets. South Korea's Kospi index experienced a sharp decline, falling 5.81% to 8,411.21, and the small-cap Kosdaq shed 4.10% to 851.37, as the broad tech sell-off swept through the region, even triggering circuit breakers for the Kospi index for approximately 20 minutes.
Japan's Nikkei 225 plummeted 4.15% to 69,360.88, briefly dipping below the 69,000 mark. The broader Topix index also lost 1.32% to 3,963.36. Tech giants in Japan felt the brunt, with SoftBank Group plunging over 13%, Advantest declining more than 10%, and Tokyo Electron down over 3%. In South Korea, index heavyweights Samsung and SK Hynix saw drops exceeding 7% and 9% respectively.
Australia's S&P/ASX 200, however, managed to defy the regional trend, edging up 0.18% to close at 8,764.20. Hong Kong's Hang Seng index was down nearly 2% in the final hour of trade, and mainland China's CSI 300 lost 3%, closing at 4,869.64.
Major U.S. tech stocks contributed to the downturn. Apple saw a 6% drop after announcing price hikes for its iPads and MacBooks, citing rising demand for memory and storage. Microsoft also fell more than 3% following similar price increases for its Xbox gaming consoles due to surging component costs. Fellow tech giants Alphabet and Meta Platforms also closed lower.
Julia Hermann, global market strategist at New York Life Investment Management, highlighted the current market's volatility, particularly in semiconductors and memory chip leaders. She noted, "This is a structurally more volatile flavor of tech than we saw in the Magnificent Seven for the past several years," further attributing the instability to an "astonishing repricing in Fed expectations."
This week has been challenging for tech-heavy indices. The Nasdaq Composite is on track for a 4.4% weekly decline, and the S&P 500 is down 1.9%. The Dow, in contrast, is bucking the trend with a week-to-date gain of 0.7%.
In other market news, oil prices slid 2% on Friday, despite fresh tensions in the Middle East. Brent crude futures for August fell 2.05% to $73.72 a barrel, while U.S. West Texas Intermediate futures for August declined 2.03% to $70.48 per barrel. Investors are monitoring developments regarding a U.S. official's claim of an Iran-backed attack on a cargo ship near Oman and ongoing disagreements between Iran and the U.S. over frozen assets. Additionally, OPEC faces potential internal conflict as Iraq reportedly seeks a higher output quota.
Precious metals also saw declines, with spot gold falling 0.87% to $3,996.79 an ounce and silver tumbling 3.62% to $55.77, pressured by a stronger U.S. dollar and expectations of prolonged higher interest rates from the Federal Reserve. Easing demand for safe-haven assets due to a fragile ceasefire between the U.S. and Iran also played a role.
On a positive note, fintech firm Airwallex announced a $320 million Series H funding round, boosting its valuation to $11 billion, a 38% increase in six months. The company, which is doubling down on AI-powered financial software, reported annualized revenue surging 74% to $1.3 billion in March.
Looking ahead, traders will be watching for May's preliminary wholesale inventories and June's final University of Michigan sentiment reading on Friday morning.
