Stock markets across Asia and Europe experienced significant declines on Monday, driven by mounting concerns over the financial sustainability of major technology companies at the heart of the artificial intelligence boom. Meanwhile, oil prices saw volatile swings as geopolitical tensions in the Middle East escalated and then partially eased.
Asian Markets Hit Hard
In South Korea, the Kospi index plunged nearly 9% at one point, triggering a brief trading halt. The drop was led by chip-making giants Samsung Electronics and SK Hynix, whose shares fell by 9% and 6% respectively. Japan's Nikkei 225 index dropped 3%, while Hong Kong's Hang Seng index declined by 1.5%.
European and US Markets Follow
In Europe, the FTSE 100 opened 0.4% lower, with Rolls-Royce and British Airways' parent company IAG among the biggest losers. However, shares in oil companies BP and Shell rose. Markets in Germany, France, and Spain also fell initially but recovered some losses after Iran announced a halt to military operations against Israel. US markets opened higher on Monday, with the S&P 500 gaining 1% in early trading, led by a recovery in chip stocks.
Tech Stocks Under Pressure
European companies at the forefront of the AI boom saw sharp declines. BE Semiconductor Industries dropped 4.5%, ASML fell 3.2%, and Aixtron lost nearly 6%. Nokia also declined by 5%. These falls followed a steep sell-off in US tech stocks last week, where the Nasdaq index lost nearly 5% of its value, and the S&P 500 dropped 2% on a weekly basis, ending nine weeks of gains.
Investor Anxiety Over AI Spending
Investors are increasingly nervous about the valuation of AI stocks, especially amid rising prospects of higher inflation and interest rates this year. Susannah Streeter, chief investment strategist at Wealth Club, noted that markets are pricing in a greater likelihood of an interest rate rise from the Federal Reserve. She highlighted concerns that tech giants with deep cash reserves are seeking fresh funding to finance massive capital expenditure plans, raising questions about the long-term viability of current investments.
Charu Chanana, chief investment strategist at Saxo, added that the market is becoming more selective on AI, demanding clearer proof of earnings delivery and monetization. She described the current trend as a positioning reset rather than a regime break, suggesting that the AI story is not over but that easy enthusiasm may be fading.
Oil Prices Swing on Middle East Conflict
Brent crude oil rose nearly 5% to $97.60 a barrel on Monday after Iran and Israel exchanged strikes, but later fell back to $94.60 after Iran announced it was halting military operations. The volatility follows the first direct exchange of strikes between the two countries since a ceasefire paused the war in April. Fears are growing that the conflict could escalate and prevent the reopening of the Strait of Hormuz, a vital shipping channel for global oil and gas supplies.
Donald Trump, speaking before the Israeli strikes on Iran, said he would dictate how the war should be conducted. However, after the bombing in Beirut and Iran's retaliation, Trump told Fox News that the strikes were not coordinated with the US and that he was unhappy about the situation.
