Tech drags down world stocks, oil dips on supply hopes

A slump in high-flying technology stocks dragged down global markets on Tuesday, with Wall Street tumbling again on valuation concerns and persistent worries over huge AI outlays.

The rout that began on US markets on Monday took a heavy toll in Asia, with South Korea’s Kospi slumping 10% on heavy selling of SK hynix and Samsung.

The tech-rich Nasdaq slumped more than 2% behind big drops in semiconductor shares. Both Micron Technology and Sandisk dived more than 13%.

Angelo Kourkafas, from Edward Jones, described the pullback as prompted by concerns that stock valuations have got out of hand, rather than a rethink in the need for the artificial intelligence boom that has lifted to record heights.

“There are some concerns about sentiment valuations and positioning, I would say, more so rather than a notable shift in the AI fundamental story,” Kourkafas said.

“The market likes to take two steps forward, one step back, and that’s the step-back phase.”

After falling the last three days, SpaceX early in the session retreated below US$150 ($264) – the level at which it began trading on June 12, its first day on the Nasdaq.

But SpaceX shares later reversed course, finishing at US$156.11, up 1.0% for the day.

Still, the announcement of a bond offering by Elon Musk’s rocket company and satellite operator added to investor unease.

SpaceX “jumping on the bond train to fund excessive AI and infrastructure spending revives earlier concerns that Big Tech may be spending too much on AI infrastructure and increasingly financing that spending through debt”, said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

Share prices of South Korean chip giants SK hynix and Samsung tumbled more than 12% to drag the Kospi index down 10%, having finished Monday at a record high.

“When you have markets that go up in a straight line ... they tend to experience sharp moves in the opposite direction at unpredictable times,” said Steve Sosnick of Interactive Brokers.

“This is what happens when markets get stretched.”

Tokyo also took a beating, shedding 3.6%, with tech investment titan SoftBank down more than 10%, Tokyo Electron 6.2% lower and Advantest off more than 2%.

Oil prices slipped, adding to recent falls as more tankers return to the Strait of Hormuz following a US-Iran deal aimed at ending the Middle East war.

Traffic on Monday through the Strait of Hormuz reached the highest level since the start of the Middle East war, according to maritime tracking data from analytics platform Kpler.

A temporary suspension of US sanctions against Iran during their negotiations also raised hopes that more oil would be hitting the market soon.

Brent North Sea Crude shed another 1.1% to US$77.08 a barrel around 3.30pm GMT and West Texas Intermediate dropped similarly to US$73.21.

Earlier in the conflict, they had soared past the US$110 mark.

Key figures around 2020 GMT

New York - Dow: DOWN 0.1% at 51,666.84 (close)

New York – S&P 500: DOWN 1.4% at 7,365.46 (close)

New York – Nasdaq: DOWN 2.2% at 25,587.04 (close)

London – FTSE 100: DOWN 0.1% at 10,428.85 (close)

Paris – CAC 40: DOWN 0.7% at 8,340.71 (close)

Frankfurt – DAX: DOWN 1.0% at 24,893.58 (close)

Seoul - Kospi: DOWN 10.0% at 8203.84 (close)

Tokyo - Nikkei 225: DOWN 3.6% at 69,788.38 (close)

Hong Kong - Hang Seng Index: DOWN 1.8% at 23,336.28 (close)

Shanghai - Composite: DOWN 1.4% at 4106.25 (close)

Brent North Sea Crude: DOWN 1.1% at US$77.08 a barrel

West Texas Intermediate: DOWN 0.9% at US$73.21 a barrel

Pound/dollar: DOWN at US$1.3196 from US$1.3251

Dollar/yen: DOWN at ¥161.52 from ¥161.57

Euro/pound: DOWN at 86.23 pence from 86.26 pence

- AFP