Global stock markets experienced a significant decline on Friday, driven by growing concerns over an artificial intelligence bubble and a tech sector selloff. The Nasdaq index, which is heavily weighted with technology stocks, fell by nearly two percent, with shares in Nvidia, the world’s leading AI chip designer, dropping by more than four percent.
The decline in tech stocks has sparked fears that the recent rally, fueled by massive investments in artificial intelligence, may be coming to an end. Analysts warn that valuations may be too high, leading to a correction in the market. “It’s one thing for equity markets to suffer a general pullback, but it’s quite another to see stocks at the vanguard of AI development getting trashed,” said David Morrison, an analyst at Trade Nation.
The selloff was also driven by weak economic data, including a decline in US consumer sentiment to its lowest level since mid-2022. The University of Michigan’s index of consumer sentiment dropped by six percent this month, with preliminary estimates indicating a reading of 50.3, down from October’s 53.6 figure. Additionally, a report from outplacement firm Challenger, Gray & Christmas showed that US layoffs hit the highest level in 22 years last month.
The ongoing US government shutdown has also added to market uncertainty, with investors forced to rely on private data to gauge the state of the economy. The shutdown has resulted in the cancellation of hundreds of flights and has put pressure on the Federal Reserve to cut borrowing costs.
Global markets were also affected by China’s export data, which showed a decline in October for the first time in eight months, as trade tensions continue to impact the economy. In London, the FTSE 100 index was dragged down by double-digit falls in the share prices of online property business Rightmove and British Airways owner IAG, following earnings updates that undershot market expectations.
As of 1640 GMT, key figures showed significant declines across major markets, including the Dow, S&P 500, and Nasdaq Composite in New York, as well as the FTSE 100 in London and the Nikkei 225 in Tokyo. The euro and pound sterling rose against the US dollar, while oil prices edged up slightly.
The decline in global markets highlights the growing concerns over the tech sector and the potential for a correction in the market. As investors continue to monitor economic data and trade tensions, the next steps for the Federal Reserve and other central banks will be closely watched. With the US government shutdown showing no signs of ending, market uncertainty is likely to persist, and investors will be looking for signs of stability in the coming days.