The global market sell-off sparked by concerns over AI valuations and spending has left investors reeling, with losses totalling £2.1 trillion across major US indices on Tuesday. This represents a significant correction to the record highs achieved earlier this year, as the Nasdaq index opened 2% lower, while the Dow and S&P 500 were down at opening.
The tech-heavy Nasdaq index has seen its value surge by 10% so far in 2023, driven by a rush of funding for AI infrastructure. Meanwhile, the Dow has jumped 6%, breaching the 51,000 point milestone, while the S&P 500 is up 7.3%. However, some economists warn that this growth is unsustainable, likening it to the dot-com bubble of the early 2000s.
Seven tech companies now account for 30% of the S&P 500's value, fuelling concerns over sector concentration and reliance on a handful of key players. The sell-off was triggered by a series of developments on Monday, including Alphabet's worst day in over a year, following the departure of two high-profile AI researchers.
Elon Musk's SpaceX also suffered a significant loss, plummeting 16% as the company announced plans to raise $20 billion through a bond sale. This comes after gaining more than $85 billion through its initial public offering (IPO). In Asia, South Korea's benchmark closed 10% lower on Tuesday, with chipmakers SK Hynix and Samsung Electronics both falling over 12%. Japan's Nikkei 225 also slipped 3.5% at the close of trading.