Global stock markets have fallen sharply amid concerns that the boom in valuations of artificial intelligence (AI) companies may be cooling. Markets in the US, Asia and Europe declined after bank bosses warned that a serious stock market correction could lie ahead, following a run of record highs that left some companies appearing overvalued.
In the US, the tech-focused Nasdaq and the S&P 500 suffered their largest one-day percentage drop in almost a month on Tuesday. The Nasdaq closed 2% lower, dragged down by technology shares, while all of the 'magnificent seven' AI-related stocks—including Nvidia, Amazon, Apple, Microsoft, Tesla, Alphabet and Meta—fell. The S&P 500 closed just over 1% down, with data analytics company Palantir slumping almost 8% despite raising its revenue outlook.
Investor Michael Burry, known for predicting the 2008 financial crash, bet against Palantir and Nvidia, sparking criticism from Palantir's boss and a stock sell-off. Asian markets followed the US falls on Wednesday, recording their sharpest slide in seven months, with indices in Japan and South Korea dropping more than 5% from record highs. European markets in the UK, France and Germany also fell slightly.
The market declines came as chief executives of Morgan Stanley and Goldman Sachs cautioned about a potential market correction, joining Jamie Dimon of JP Morgan Chase, who warned in October of a possible crash within six months to two years. Jim Reid, an analyst at Deutsche Bank, noted a 'growing chorus discussing whether we might be on the verge of an equity correction', adding that concerns over lofty tech valuations have hit investor sentiment.
Other analysts have questioned investment in AI companies, highlighting that most AI investment has been promised to a small group of firms like OpenAI and Nvidia, with little return so far. The price of bitcoin briefly dipped below $100,000 for the first time since June, as investors withdrew from riskier assets over fears about the economic outlook.
