European markets sharply declined at the start of trading on Friday as global selling spread from Wall Street to Asia and Europe due to concerns over AI stocks.
Concerns Over AI Costs
Concerns about potential restrictions on the costs of artificial intelligence data centers have added to investor worries after the Democrats gained control of both chambers of the U.S. Congress. These issues led to a 1.6% drop in the STOXX 600 index in early trading, wiping out all gains for the week. Most major European markets fell by more than 1%, with media, healthcare, and retail stocks experiencing the largest declines.
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Impact of Asian Market Declines
Asian markets were also affected by the severe selling on Wall Street. The Nikkei 225 index in Tokyo fell by 5.5% in early trading, and the tech-heavy KOSPI in Seoul dropped by 8.8%, leading to a 20-minute trading halt. Additionally, Taiwan's TAIEX index fell by more than 8%. Asian tech giants, including Samsung Electronics, SK Hynix, and Taiwanese semiconductor manufacturer TSMC, suffered the most from the AI-related drop.
Samsung's stock fell nearly 10%, and SK Hynix dropped over 11%. Chip-related stocks in Japan were also under pressure, with Tokyo Electron down about 9% and Kioxia falling 13%.
U.S. Market Declines and Political Concerns
U.S. markets were also under severe pressure on Thursday due to declines in tech stocks, particularly those involved in building AI infrastructure like data centers. The Nasdaq faced a drop of 5.52%, with market value decreasing by $2.5 trillion (about €2.23 trillion), while the S&P 500 also fell by 4.4%.
This drop occurred as investors were deeply concerned about the massive spending plans for AI and whether these expenditures would ultimately lead to reasonable profits. The results of the U.S. midterm elections, which resulted in Democratic control of both chambers of Congress, have added to these concerns.
Several elected Democratic governors campaigned on reducing AI development and promised to halt or delay the construction of data centers, as public opposition to such projects is rising.
Michael McCarthy, CEO of Moomoo in Australia and New Zealand, said, "It is clear that sentiment has changed dramatically. Market turning points are usually accompanied by sharp disagreements, and this is reflected in the market with large fluctuations in both directions. It seems we are now heading in this direction."
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