Economy
Stocks Slump as AI Spending Spooks Investors: Alphabet Drops 12.6%, Wiping $500 Billion
Tech shares slumped across Asia on Friday as investors questioned whether huge and rising AI spending will deliver sufficient returns, after Alphabet lost $500 billion in market value and bonds surged toward their biggest monthly gain in nearly three years.
Photo: Forextime.com / Wikimedia Commons (CC BY 2.0). Photo shows a stock market concept, not Alphabet's offices.
Tech shares slumped in Asia on Friday, the yen rose, and bonds surged toward their biggest monthly gain in nearly three years as investors scurried to safety against worries that huge and rising artificial intelligence spending may not deliver sufficient returns.
Shares in Google parent Alphabet fell 12.6% on Wall Street and slid a little further after hours, wiping out some $500 billion in market value, as massive AI spending turned the company's cash flow negative.
An aftermarket plunge of 23% in Intel shares and a drop of 7% in Amazon shares, as they too burn through cash, drove Nasdaq 100 futures down 1.4% and sent stocks of chipmakers across Asia into a tailspin.
"The market isn't necessarily questioning whether the AI buildout can be financed," said Pepperstone analyst Chris Weston. "It's increasingly questioning whether shareholders will earn an adequate return on the enormous capital being deployed."
Nerves were also frayed by a potentially record-breaking hack at Binance, the world's biggest cryptocurrency exchange, which drove down bitcoin, other cryptocurrency prices, and shares including rival exchange Coinbase.
South Korea's KOSPI slumped 5% for an October fall of more than 17%. Japan's Nikkei fell 3%. In China, the blue-chip CSI300 headed for its largest monthly fall in a decade, after nearly four months of AI stocks tanking on fears that a slowdown in demand for chips and other data centre equipment could crush revenues.
Investors' rush into bonds was further spurred by the Federal Reserve's Wednesday decision to keep US interest rates on hold, with no firm projection of when it might need to hike next. Benchmark 10-year US Treasury yields fell by more than 7 basis points in Tokyo trade on Friday to 4.91%, for a fall of some 37 basis points through October — the largest one-month drop since December 2023. Two-year yields dropped by more than 8 basis points to 4.57%.
The Bank of Japan was expected to leave rates on hold later on Friday, in a decision capping a week of major central bank meetings. The risk-averse mood strengthened haven currencies such as the yen and the Swiss franc, with the yen up about 0.2% at 157.47 per dollar and the franc at 0.8213 to the dollar, not far from a one-month high. The euro inched up 0.1% to $1.1194.
Source: Reuters
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