US tech stocks tumble as investors fret over AI spending

US tech stocks have dropped sharply against the backdrop of market jitters over the sustainability of businesses' enormous capital investments in AI.

Key points

• Global AI investment is forecast to reach $2.7 trillion in 2026 and $3.6 trillion in 2027, according to technology insights firm Gartner.
• The broader S&P 500 slid 1.21 percent, the benchmark's biggest drop since a 1.52 percent decline on July 29.
• While South Korea's KOSPI dropped as much as 3.5 percent, japan's benchmark Nikkei 225 fell more than 2 percent in morning trading before recovering some ground.
• Brent crude futures rose 4 percent on Thursday and continued to climb on Friday morning, taking the international benchmark above $114.20 a barrel, its highest since May.
• The Hang Seng Index in Hong Kong fell regarding 0.5 percent.

Notably, the Nasdaq Composite, which is dominated by tech firms linked to the AI boom, fell 2.6 percent on Thursday, its steepest fall since the index tumbled 4.2 percent on June 5.

Notably, the broader S&P 500 slid 1.21 percent, the benchmark's biggest drop since a 1.52 percent decline on July 29.

Apart from Apple, each of the "Magnificent 7". It create up more than one-third of the overall market, saw substantial losses.

Meta dropped almost 7 percent after it raised its projected capital spending for this year to $135bn to $145bn in its latest earnings report, even as the Facebook parent company's net profit fell short of expectations. While Nvidia dropped 4.4 percent, amazon fell 4.6 percent.

While Microsoft declined 2.2 percent, tesla and Alphabet both fell 3.1 percent. Apple rose 1.2 percent.

In practice, the sell-off extended to other major tech players, including Intel and Advanced Micro Devices, both of which fell regarding 8 percent, and Broadcom. It slid 4.3 percent.

Rising oil rates since February, due to the fallout of the US-Israel war on Iran, went on to the downbeat mood.

Brent crude futures rose 4 percent on Thursday and continued to climb on Friday morning, taking the international benchmark above $114.20 a barrel, its highest since May. Stocks slip in Asian trading.

After the losses on Wall Street, major stock markets in Asia opened lower on Friday.

Notably, the Hang Seng Index in Hong Kong fell regarding 0.5 percent.

Jay Goldberg, a senior analyst at Seaport Research Partners in San Francisco, remarked the swings in the market appeared to be driven more by sentiment than underlying fundamentals.

"In short, nothing has changed. Investors have just decided to be afraid this week. Everyone I speak to points to a different cause for the downfall. It's just a giant wall of worry, " Goldberg informed Al Jazeera.

"There are legitimate concerns about the AI trade, but this level of shift in the markets is driven much more by investor sentiment than any tangible reason."

US tech firms' enormous investments in AI have stoked intense debate regarding whether a market bubble is forming similar to the one that preceded the 2000 dot-com crash.

While some Wall Street analysts view current levels of investment in datacentres and graphics processing units as unsustainable, others argue that AI will revolutionise society to a degree that justifies the eye-watering sums involved.

In short, US tech stocks tumble as investors fret over AI spending is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.