Global financial markets in both the US and Asia have seen significant declines as investors pull back from technology stocks, with AI-related shares experiencing substantial losses.

In Wednesday’s trading in New York, the S&P 500 fell by 2.3%, and the tech-centric Nasdaq dropped by 3.6%, marking their largest one-day declines since 2022. The Dow Jones Industrial Average also saw a decline of 1.2%. Key tech firms such as Nvidia, Alphabet, Microsoft, Apple, and Tesla were major contributors to these losses.

On Thursday, Japan’s Nikkei index led the downturn in Asia, falling by 3%. Technology stocks, particularly those involved in AI, have been central to this year’s market gains, but they are now facing significant sell-offs.

Nvidia, a leading AI chip manufacturer, saw its shares drop by 6.8%, with a 15% decline over the past two weeks. The company’s financial results are expected at the end of August. Tesla, Elon Musk’s electric vehicle company, experienced a 12% drop in its stock following disappointing financial results. Alphabet, the parent company of Google and YouTube, saw a 5% decline in its stock price despite reporting better-than-expected financial results earlier this week. The company plans to maintain high spending through the rest of 2024, investing heavily in AI development.

In Asia, major chipmakers such as Renesas Electronics, Tokyo Electron, and South Korea’s SK Hynix were among the significant decliners.

Jun Bei Liu, Portfolio Manager at Tribeca Investment Partners, noted that while investors are concerned about the high expenditures on AI without immediate revenue returns, this does not signify a loss of faith in AI. Instead, it indicates a shift towards a focus on returns within the sector rather than broad investments.

Investors are also cautious due to uncertainties in the US presidential election campaign and the timing of potential interest rate cuts by the US central bank.