Global stock markets have declined significantly amid growing concerns that valuations of artificial intelligence companies have become inflated. The sell-off began in the United States, where the tech-focused Nasdaq and S&P 500 experienced their largest one-day percentage drops in nearly a month on Tuesday. The Nasdaq closed down 2 percent, while the S&P fell just over 1 percent, both driven by losses in technology stocks.
The decline affected major AI-related companies heavily. All seven of the "magnificent seven" stocks, including chipmaker Nvidia, Amazon, Apple, Microsoft, Tesla, Alphabet, and Meta, posted one-day losses. Data analytics company Palantir slumped nearly 8 percent despite raising its revenue outlook the previous day. Investor Michael Burry, known for predicting the 2008 financial crisis, bet against Palantir and Nvidia, contributing to the sell-off. Palantir's chief executive Alex Karp criticized Burry and other short-sellers for "trying to call the AI revolution into question."
Asian markets followed the US decline on Wednesday, recording their sharpest drop in seven months. Stock indices in Japan and South Korea fell more than 5 percent from the previous day's record highs. European markets in the UK, France, and Germany also posted slight declines on Wednesday morning.
The market turmoil intensified after executives from major financial institutions warned of a potential correction. Jamie Dimon, head of JP Morgan Chase, warned in October he was worried markets would crash within six months to two years. More recently, chief executives of Morgan Stanley and Goldman Sachs cautioned that a market correction could be approaching. Jim Reid, an analyst at Deutsche Bank, noted there was a "growing chorus discussing whether we might be on the verge of an equity correction," adding that "concerns over lofty tech valuations have hit investor sentiment."
Some analysts have questioned the investment climate for AI companies, pointing out that the vast majority of investment in AI programs has concentrated among a small group of tech companies, particularly OpenAI and Nvidia, while returns on investment remain limited so far.
The broader concern about economic outlook affected other risk assets. Bitcoin briefly dipped below 100,000 dollars for the first time since June as investors withdrew from riskier assets. The cryptocurrency, which touched a record price of more than 126,000 dollars in early October, experienced its worst monthly performance in the last decade in October, falling 3.7 percent during that month.