Nasdaq Futures Slide as Global AI Selloff Gathers Pace — Update
By Joe StonorNasdaq futures dropped sharply as a global rout in stocks linked to artificial intelligence accelerated, while hotter-than-expected inflation didn't stop a rally in U.S. Treasurys.Renewed expectations for tighter Federal Reserve policy following Wednesday's hot inflation print added to already nervous sentiment around AI. Investors are fretting about the scale of corporate borrowing to fund the buildout in AI, compounding fears around political pushback against data centers and Chinese chip competition."We are seeing some blocks being pulled out of the Jenga Tower that is the AI capex boom," said Panmure Liberum strategist Joachim Klement."Higher debt costs makes it extremely difficult for neoclouds and hyperscalers to finance further data centers now that their free cash flows have evaporated."S&P 500 futures dropped 0.3%, while futures for the tech-heavy Nasdaq fell 1.2% after the index recorded its worst day since July in the last session. Asian stocks tumbled as shares in the region's banner AI stocks lost ground. Chip makers Samsung Electronics and SK Hynix lost 9.5% and 11%, respectively, in South Korea, while Japan's SoftBank Group fell 9.3%.Better-than-expected guidance from Taiwan Semiconductor Manufacturing Company failed to boost sentiment as the Kospi closed 7.5% lower and the Nikkei 225 dropped 4.9%. In Europe, the continent's most valuable company, ASML, fell over 6%. The selling extended into premarket trade. Micron dropped 4.5% premarket, while Intel and Advanced Micro Devices each lost around 3.5%. Nvidia was 1.85% lower. CoreWeave shares dropped 3.6% premarket after the stock fell more than 15% in the prior session as investors piled pressure on the cloud company's bonds.The producer price index rose 1.3% in September--translating to growth of 6.3% on year--well ahead of consensus expectations. However, Treasury yields extended falls as investors fleeing AI stocks turned to the safe haven of Treasurys, while lower oil prices also helped to weigh on yields. Ten-year Treasury yields dropped below 5.100%, while 30-year yields fell 13.4 basis points to trade below 5.400%. Eurozone bond yields fell in line with their U.S. peers.Brent crude oil prices fell 1.4% to trade around $104.50 a barrel, even amid continued strikes on shipping across the region. The fall in oil supported the Dow Jones Industrial Average, with futures for the index rising 0.4%.The dollar weakened as yields lowered, helping gold prices to rise 1.3% to $4,160 a troy ounce. The weaker greenback wasn't enough to support bitcoin, with the cryptocurrency extending losses to fall 1.4% to around $80,500.For the day ahead, Fed policymakers Austan Goolsbee and Beth Hammack are due to speak.Write to Joe Stonor at [email protected]