A fresh wave of selling gripped financial markets across the United States and Asia, as growing AI market jitters forced a stark reversal in stock prices and overshadowed positive corporate results.
What began as a promising rally on Wall Street, fueled by stellar earnings from AI bellwether Nvidia, quickly unraveled on Thursday. The three major U.S. indexes swung from gains to deep losses, a pattern that then echoed throughout Asian trading sessions on Friday. This persistent downturn signals that investor anxiety about the AI sector’s lofty valuations is now trumping strong fundamental news.
“The market’s action is telling,” said James Stanley, a senior analyst at StoneX. “We had every reason to rally, but the buying momentum vanished. This suggests a deeper, more systemic worry is taking hold beneath the surface.”
Despite AI market jitters Nvidia reporting another quarter of blockbuster sales and CEO Jensen Huang dismissing concerns about overvaluation, investors opted to take profits. The chipmaker’s stock, after surging in early trading, ended the day down more than 3%. The broader tech-heavy Nasdaq Composite index fell over 2%, while the S&P 500 dropped 1.5%.
Asia Follows Suit, Tech Stocks Bear the Brunt
The AI market jitters proved contagious. In Asia, Japan’s Nikkei 225 index fell by more than 2.5%, with a massive 10% drop for tech investment giant SoftBank. South Korea’s Kospi was hit even harder, tumbling around 4% as the country’s flagship chipmakers, SK Hynix and Samsung, fell more than 8% and 6%, respectively. Hong Kong’s Hang Seng also declined by almost 2%.
The sell-off wasn’t confined to equities. The AI market jitters price of Bitcoin also extended recent declines, falling below $90,000. Analysts noted that part of the pressure on cryptocurrencies stems from the same risk-aversion affecting high-flying tech stocks, fueled by concerns about an AI bubble.
The Core of the Anxiety: Irrational Exuberance or Healthy Correction?
The current volatility underscores a critical debate on Wall Street: is this the beginning of the end for the AI investment boom, or simply a necessary cooling-off period?
Just this month, Alphabet CEO Sundar Pichai warned of some “irrationality” in the AI sector, a sentiment that appears to be resonating with investors. While the long-term potential of AI is widely accepted, the question is whether stock prices have run too far ahead of actual, near-term profitability for many companies in the space.
Analysts at Oxford Economics suggest the pullback is likely “a healthy correction rather than the start of something more threatening.” They believe it is too early to declare the AI investment boom over, but acknowledge that tech stocks were ripe for a period of profit-taking.
The Interest Rate Wild Card
Compounding the AI market jitters is ongoing uncertainty about the path of interest rates. Investors remain on edge, awaiting key inflation data that was delayed by the recent U.S. government shutdown. This data is crucial for determining if and when the Federal Reserve will begin to cut rates.
“The market is priced for perfection,” said Eric Teal, chief investment officer at Comerica Bank. “You need all the external catalysts, like continued AI adoption and lower interest rates, to keep driving it higher. When doubts emerge on either front, volatility is the inevitable result.”
With the S&P 500 on track for its worst month since March, it’s clear that investors are “squaring up” as they grapple with a foggy economic outlook and the fear that the AI revolution, for all its promise, may have been too expensive to buy into.
