Chip shares lead global market slide as AI trade wobbles

A tech-led selloff swept through major markets, with semiconductor shares under pressure as investors questioned whether the AI chip trade had run too far, Fortune reported Friday. The move matters because AI-linked stocks have been a central support for equity markets, while Apollo Global Management analyst Torsten Sløk warned that a slower payoff from AI spending could weigh on both markets and the economy.

U.S. stock futures were lower before the New York open after declines in Asia and early weakness in Europe, according to Fortune. The report cited disappointing investor reactions to earnings calls from TSMC and Netflix as triggers for the latest move.

TSMC fell 2.63%, while Netflix dropped 9.24% overnight, Fortune reported. In U.S. trading outside regular hours, Intel, Micron, AMD and Marvell also declined after losing ground before the previous close, according to Fortune.

Asia bears the brunt

The selloff hit several Asian benchmarks, with technology-heavy indexes among the hardest hit, Fortune reported. Japan’s Nikkei 225 fell 4.03%, while South Korea’s KOSPI dropped 6.37% in its previous session and was closed Friday.

Fortune noted that the KOSPI can swing sharply because Samsung and SK Hynix account for about half of the index’s weight. The report also cited the Financial Times in saying South Korea allows retail investors to buy leveraged exchange-traded funds, which can amplify market moves.

China’s CSI 300 fell 3.6%, while India’s Nifty 50 rose 1.22%, according to Fortune. In Europe, the Stoxx 600 was down 0.7% in early trading, while Britain’s FTSE 100 was flat before lunch.

• S&P 500 futures were down 0.66%, according to Fortune.
• The S&P 500 had fallen 0.51% in the prior session, Fortune reported.
• Brent crude traded at $84 a barrel, according to Fortune.
• Bitcoin was at $62,700, Fortune reported.

AI spending worries widen

Fortune reported that investors appeared to view the AI chip business as overbought. The pullback comes as analysts debate whether the companies building AI infrastructure will turn large capital spending into enough revenue.

Sløk, chief economist at Apollo Global Management, said there could be a timing problem between capital expenditures and free cash flow at AI hyperscalers, according to Fortune. He argued that if AI model revenue disappoints because of pressure from Chinese and open-source competitors, weaker earnings could drag on the broader stock market.

Sløk also warned that cuts to data center construction budgets could hurt economic growth, according to Fortune. He said IT-related capital spending is currently propping up U.S. corporate investment.

“The bottom line is that AI has been the one thing holding up both the economy and markets, and with so much riding on so few names, a slower payoff wouldn't just be a sector problem, it would risk tipping the economy into recession and the S&P 500 into a correction,” Sløk said, according to Fortune.

Oil and inflation remain in focus

Deutsche Bank’s Jim Reid told clients that concerns about rate increases and more persistent inflation remained in the background, Fortune reported. The report also cited the war as a factor weighing on sentiment, while oil prices held in the mid-$80s.

UBS Wealth Management senior vice president Charlie Anderson offered a more upbeat view, forecasting the S&P 500 would reach 7,900 by year-end, according to Fortune. Anderson said in an email cited by Fortune that investors had shifted attention from macro headlines toward company earnings and execution.

This story draws on original reporting from Fortune.