Stock markets across Asia fell sharply Wednesday, with South Korea's Kospi index dropping more than 5 percent from recent record highs as concerns about technology sector valuations spread from Wall Street. The decline marked the sharpest slide in seven months as investors reassessed the costs and returns of artificial intelligence investments.
The selloff followed steep losses in the United States, where the tech-focused Nasdaq and S&P 500 suffered their largest one-day percentage drops in nearly a month. Technology stocks drove both indexes lower, with the Nasdaq closing down 2 percent and the S&P down just over 1 percent. All seven of the major AI-related companies, including Nvidia, Amazon, Apple, Microsoft, Tesla, Alphabet, and Meta, fell on the day.
The market weakness intensified after prominent short-seller Michael Burry, known for predicting the 2008 financial crisis, announced bets against Palantir and Nvidia. This move sparked criticism from Palantir's chief executive Alex Karp, who said short-sellers were "trying to call the AI revolution into question." Palantir itself fell nearly 8 percent despite raising its revenue outlook the previous day.
Chief executives from major financial institutions added to investor concerns. Leaders at Morgan Stanley and Goldman Sachs warned a market correction could be approaching, echoing earlier cautions from Jamie Dimon at JP Morgan Chase, who warned in October about potential crashes within six months to two years. Jim Reid, an analyst at Deutsche Bank, noted a "growing chorus discussing whether we might be on the verge of an equity correction," citing concerns over elevated tech valuations affecting investor sentiment.
Analysts have questioned whether massive investments in artificial intelligence programs justify current valuations. They point out that the vast majority of AI investment has concentrated on a small group of companies, particularly OpenAI and Nvidia, while generating limited financial returns so far.
The market turmoil extended to cryptocurrencies, with bitcoin briefly falling below $100,000 for the first time since June. Bitcoin had reached a record price above $126,000 in early October before declining 3.7 percent that month, marking its worst monthly performance in a decade.
Markets in Europe showed mixed signals Wednesday morning, with indices in the UK, France, and Germany falling slightly. The divergence across global markets reflected ongoing tension between concerns about technology sector valuations and optimism in other sectors. Investors continued weighing various economic factors as they reassessed positions across different asset classes and regions.