Stay informed with free updates
Simply sign up to the US equities myFT Digest — delivered directly to your inbox.
US tech stocks fell sharply on Thursday, extending a heavy sell-off as investors continued to move out of previously high-flying AI-linked shares.
The tech-heavy Nasdaq Composite fell 1.9 per cent in morning trading, on course for its third consecutive session of heavy losses and its worst week since November. The blue-chip S&P 500 lost 1.5 per cent.
Index heavyweight Alphabet led the market lower, falling more than 5 per cent as its plan to double capital expenditure to as much as $185bn intensified simmering concerns about when Silicon Valley’s vast AI expenditure will generate returns.
Those worries about profitability — as well as concerns about overvaluation in artificial intelligence stocks and concentration risk — led to the drop in Alphabet’s shares despite very strong quarterly earnings.
“Google’s results were really good in terms of demand for Google products,” said George Pearkes, macro strategist at Bespoke Investment Group. But he added that “the market is getting a natural correction and a test of the AI story”.
Chipmaker Qualcomm fell 12 per cent after the company signalled on Wednesday that a shortage of memory chips could limit the production of smartphones. Data storage group Western Digital lost 4 per cent and data intelligence company Palantir shed 4 per cent. Amazon and Tesla lost 3.5 per cent and 1.6 per cent respectively. Amazon is set to report earnings after the bell.
Software stocks and chipmakers have been hit particularly hard over the past few trading sessions as investors worry that new coding tools, including those released by AI group Anthropic last week, will upend sectors from law and publishing to advertising.
The drop in stocks sent investors into safer corners of the market, including Treasury debt. The two-year Treasury yield, which moves with interest rate expectations, fell 0.09 percentage points to 3.47 per cent, its lowest level in a month.