The global stock market took a hit on Thursday, with the S&P 500, Dow Jones Industrial Average, and Nasdaq composite all experiencing declines. The Australian market is also expected to slide, with ASX futures pointing to a fall of 0.2%. This downturn is largely attributed to the slump in AI-related stocks, which have been under pressure due to concerns about their sustainability and the potential impact of AI on profitability and productivity.
One of the key factors driving this decline is the pressure on computer chipmakers and other AI-related stocks, which have seen their prices soar to unprecedented heights. The demand for computer memory and processors has been insatiable, but there are worries that this demand may not be sustainable if AI fails to deliver the promised profits and productivity gains.
Nvidia, the largest company on Wall Street by value, saw its stock fall 2.4%, making it the heaviest weight on the S&P 500 index. Other AI winners, such as Micron Technology and Sandisk, also took a hit, with their stocks falling by 5.6% and 12.6%, respectively. Western Digital's stock also sank by 9.2%, despite being up 171% for the year so far.
The global market turmoil is not limited to the US and Australia. In South Korea, the Kospi index fell 6.4% due to the decline of AI-related stocks like Samsung Electronics and SK Hynix. The Kospi had experienced a 6.2% jump the day before, but it has been volatile in recent weeks, with drops of 8.9%, 7.8%, and 5.3%.
The decline in the market is also influenced by the Bank of Korea's decision to hike interest rates, which is expected to slow the economy and hurt investment prices. The Federal Reserve and other central banks worldwide may also have to raise rates to control the effects of expensive oil, which is near its highest level in a month due to concerns about the war with Iran.
The bond market is also experiencing turbulence, with the 10-year Treasury yield rising to 4.56%, sending the average 30-year mortgage rate to its highest level in nearly a year. Reports on the US economy have been mixed, with some indicating a solid job market and others showing a decline in consumer spending.
Despite the market turmoil, there is a glimmer of hope. Hong Kong's Hang Seng rose 1.3% after China's cyberspace regulator approved the Apple Intelligence AI tool for use in China. Alibaba's Qwen model will be integrated into Apple Intelligence, which could potentially boost the company's performance.
In conclusion, the global stock market is facing a challenging period, with AI-related stocks taking a hit and concerns about the sustainability of the market's current trajectory. However, there are also reasons for optimism, such as the potential integration of AI tools into major tech platforms, which could drive innovation and growth in the long term.
