Heavy selloffs in tech stocks hammered equity markets yesterday, tracking a plunge on Wall Street as disappointing earnings caused traders to panic that a long-running rally in the sector might have been overdone.
Tokyo’s Nikkei 225 index led the retreat in equities, diving more than 3 percent, with a stronger yen adding to the downward pressure on exporters.
Global stocks have pushed ever higher this year — with New York’s three main indices hitting multiple records — with tech titans such as Alphabet Inc and chipmakers such as Nvidia Corp and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) boosted by an explosion of interest in all things linked to artificial intelligence (AI).
Photo: Bloomberg
The rallies have been helped by blockbuster profits and upbeat outlooks, causing investors to pile more cash in owing to a fear of missing out.
However, with valuations pushing to dizzying heights, analysts have been warning about retreat, and Tuesday’s earnings from Tesla Inc and Google-parent Alphabet Inc provided a selling opportunity.
Tesla said profits fell 45 percent in the second quarter owing to price cuts and aggressive AI investment, and while Alphabet exceeded forecasts, results from YouTube were less upbeat.
The two firms are part of the “Magnificent Seven” tech kings who have been key to driving gains in the market this year. Tesla shed 12.3 percent and Alphabet gave up 5 percent on Wednesday in New York trading.
All three main indices on Wall Street tumbled, with the NASDAQ shedding more than 3 percent and the S&P 500 down more than 2 percent on its worst day since December 2022.
Asia followed suit, with tech firms among the big losers — Seoul’s SK Hynix Inc dived nearly 9 percent despite strong earnings, while Samsung Electronics Co lost 2 percent.
Tokyo-listed Sony Group Corp was off more than 5 percent and Softbank Group Corp fell 9.4 percent, and in Hong Kong Tencent Holdings Ltd (騰訊) gave up 3 percent with Meituan (美團) 5.7 percent lower.
Shares in Sydney, Seoul, Singapore, Wellington, Mumbai, Bangkok, Manila and Jakarta were also well in the red. Taipei was closed for a second day owing to a typhoon. London, Paris and Frankfurt were sharply lower in the morning.
SBI Securities Co senior analyst Hideyuki Suzuki told AFP that “falls in the US tech sector — especially a plunge in Tesla shares, and disappointing Alphabet earnings — as well as a stronger yen weighed on the market.”
The boom in electric vehicle sales is slowing, and “excessive expectations for AI and other technologies are being corrected,” he said.
However, he added that “it’s not that economic fundamentals are worsening, so shares may rebound after” Japanese and US central bank meetings.
“The yen is higher on speculation that the Bank of Japan may hike interest rates” at its meeting next week, but views are divided, Suzuki said.
The Japanese unit extended a rally against the US dollar that has been underway in recent weeks, having strengthened to as much as ￥152.10 per US dollar at one point.
“We expect the yen to appreciate as the rate gap between Japan and the US narrows and speculation against the Japanese currency fades,” Moody’s Analytics senior economist Stefan Angrick said.
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