Wall Street’s main indexes were subdued at the open on Wednesday, following a tech-led selloff in the previous session over surging valuation concerns.
At the opening bell, Wall Street’s main indexes were muted: the Dow Jones Industrial Average rose 0.03 per cent to 47,097.31, the S&P 500 fell 0.03 per cent to 6,769.77, while the Nasdaq Composite rose 0.04 per cent to 23,358.075.
But selling extended into a second day on Wednesday in global markets, leaving those in Seoul and Tokyo around five per cent beneath┬аpeaks reached on Tuesday morning.
Falls in technology┬аstock prices from the day before are cause for caution but not panic yet, say brokers and investors who have been riding a runaway market to┬аrecord highs and some stretched valuations.
Hardest hit have been the biggest winners of a rally that┬аhas vaulted chipmaker Nvidia from a niche player to the most┬аvaluable company on Earth.
“The selloff appears to be largely positioning-driven, with┬аrecent outperforming names taking the worst of the move,” said┬аJon Withaar, senior portfolio manager at Pictet Asset Management┬аin Singapore.
There was no obvious trigger for the pullback, which began┬аwith an unexpectedly negative reaction to strong financial┬аresults at Silicon Valley data and artificial intelligence firm┬аPalantir Technologies.
Shares in the market darling finished down nearly eight per cent on┬аTuesday, and fell a further three per cent in extended trade.
“So people are up to their noses in these AI stocks,” said┬аHerald van der Linde, head of equity strategy for Asia Pacific┬аat HSBC. “But how much further can they go? How much more can┬аthey buy? And my belief is that what we’re going to see is a┬аbreather … and the breather could come with a rotation.”
On Tuesday, Nvidia shares fell nearly four per cent on Wall Street to┬аtrade down about seven per cent from last month’s peak. Meanwhile, suppliers,┬аcompetitors and firms up and down the AI supply chain came in┬аfor a beating in Asia on Wednesday.
“It’s fairly blanket selling in the risk-leverage part of┬аthe market, which to us looks like short-term profit-taking,”┬аsaid Angus McGeoch, Barrenjoey’s head of equities distribution┬аfor Asia in Hong Kong.
He said fund managers with an eye on their 2025 results┬аwould be quick to duck out of the downturn at this time of year,┬аbut are not yet looking for a wholesale exit.
“Obviously (they) don’t want to give up a lot, given the┬аyear’s been kind … but if the market looks like it wants to┬аgo again, then I don’t think it would take much to get people┬аback involved.”
Fears of an AI bubble
Markets have for months marched past worries over elevated┬аinterest rates, stubborn inflation, trade turmoil and a patchy┬аglobal economy leading to questions about whether the artificial┬аintelligence boom is a bubble waiting to burst.
Tuesday’s two per cent drop in the Nasdaq followed a rise┬аof more than 50 per cent from April lows.
The Current13:32Will the A.I. bubble burst?
There are growing concerns from economists, tech industry insiders and investors that artificial intelligence might be a bubble about to burst. Data centres are a rapidly growing part of the U.S. so big that some observers like MIT fellow Paul Kedrosky believe it’s warping the North American economy. Murad Hemmadi, a reporter with the Logic, argues that we only know about bubbles in hindsight, and until it bursts, we’re going to be waiting to find out.
Wall Street chiefs Ted Pick of Morgan Stanley and David┬аSolomon of Goldman Sachs gave voice to some of the unease in┬аmarkets and raised the prospect of a pullback at an investment┬аsummit in Hong Kong.
Big name investor Michael Burry, who famously predicted the collapse of the U.S. housing bubble which led to the 2008 financial crisis and is depicted in the movie The Big Short, has bet against both Nvidia and Palantir, which has fuelled fears about a bubble.
That move comes just days after Burry posted to X, saying “Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play.“
Moreover, South Korea’s stock exchange cautioned against┬аinvesting in chipmaker SK Hynix тАФ a routine warning for the┬аstock that had tripled in 12 months but enough to trigger a six per cent┬аtwo-day fall.
Matthew Haupt, lead portfolio manager at Wilson Asset┬аManagement in Sydney, viewed the downturn as investors taking┬аmoney off the table ahead of Wednesday’s U.S. Supreme Court┬аhearing on the legality of tariffs.
“I’ve been buying today,” he said. “I hope I’m right.”┬а
