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US technology stocks rebounded on Friday after three days of heavy selling that shaved more than $1tn from the Nasdaq’s market value.
Amazon shares fell 9 per cent on Friday after saying its capital expenditure will hit $200bn this year, but the broader market recovered part of the week’s heavy losses.
The tech-heavy Nasdaq Composite index recovered 0.9 per cent, but remains more than 3 per cent lower this week. Chipmaking giant Nvidia climbed 5 per cent on Friday, but is still down more than 5 per cent since last Friday.
The sell-off has been prompted by investors’ nerves about the vast scale of tech giants’ investment in AI, and fears that the technology will disrupt the business models of capital-light stocks such as data analytics, publishers and software providers.
“The market is rethinking its approach to AI,” said Fabiana Fedeli, chief investment officer for equities at M&G, adding that investors are now “a lot more selective in which companies [they] will decide to bet on”.
Amazon, Google, Meta and Microsoft have unveiled plans to spend a combined $660bn on AI build-out this year, a 60 per cent rise from their 2025 spending.
The numbers prompted a new wave of investor scrutiny about when the vast spending is likely to generate a return.
“We are worried in places where we see huge increases in spending but we cannot see what the pay-off is going to be,” said Michiel Plakman, head of global equity at asset manager Robeco.
“You have to sit through it, name by name, to see if they’re in the right camp and doing the right things,” he said.
The release of new software by AI group Anthropic has fuelled a heavy sell-off in software stocks perceived to be under threat from the technology.
Anthropic last week launched a series of open-source plug-ins for its AI coding tool, Claude Code, which are tailored to specific corporate uses such as automating legal contract reviews.
Private credit groups including Ares and Blue Owl, which have been big lenders to the software companies, have also been hit in the sell-off.
“Any company which collates, aggregates, disseminates software and data as a service [is] seen as increasingly vulnerable to disruption from AI-driven tools,” said Sharon Bell, senior equities strategist at Goldman Sachs.
“The Anthropic announcement was just a catalyst to realise fears that have been growing,” she added. “Some of the incumbents will prove to have resilient moats, and some won’t but will adapt.”
Other risky assets have also been hit this week. Bitcoin, viewed as a speculative asset that falls in risk-off market periods, dropped below $70,000-a-token this week for the first time since 2024, and is currently trading around $67,300.