Stocks dropped across the world on Friday, reflecting fresh fears among investors about the war in the Middle East and the resilience of the AI boom.
Nodding to the news that a vessel was struck in the Strait of Hormuz on Thursday, Susannah Streeter, the chief investment strategist at Wealth Club, said in a morning note that "fears of geopolitical fracture opening up again are colliding with a return of worries about super-high tech valuations."
"Right now, investors are highly sensitive to worries about how long the voracious demand for chips to power the AI revolution will last," she continued.
"There's a feeling that there's only so long this can go on for, with companies also balking at the high cost of tokens used to pay for the use of large language models."
Here's where key markets stood as of 8 a.m. ET:
- In the US, Nasdaq 100 futures were trading 1.2% lower, S&P 500 futures were down 0.5%, and Dow Jones futures were down 0.1%. Micron stock fell 5% in premarket.
- In Europe, Britain's FTSE 100 was down 0.9%, Germany's DAX was down 1.3%, and the Euro Stoxx 50 was down 1%. German chipmaker Infineon was down almost 4%.
- Asian stocks closed lower with South Korea's KOSPI down 5.8%, Japan's Nikkei down 4.1%, and Hong Kong's Hang Seng down 1.8%.
"There seems to be a mini ice age in Asia this morning with tech again selling off," Jim Reid, Deutsche Bank's head of macro and thematic research, said in a morning note.
Major chipmakers Samsung Electronics and SK Hynix ended the day 5.3% and 8.4% lower, respectively.
SoftBank slumped 13% after The New York Times reported that OpenAI, one of the Japanese conglomerate's biggest AI investments, could delay its initial public offering until next year.
Reid noted the sell-off followed a sharp decline for the Magnificent Seven stocks on Thursday, after Apple said it would raise the price of its Macs and iPads in light of rising costs tied to chip shortages, sending its stock down 6%.
Apple's announcement "came in response to demand surges for memory and storage, but the news played into broader concerns that AI data centers were generating inflationary pressures," Reid said.
"The fact that Apple — one of the most powerful buyers in the industry — cannot absorb the cost surge and must pass it on to consumers raises serious questions about demand elasticity and the durability of memory chip margins," wrote Fabien Yip, a market analyst at IG.
