The fragile AI trade
SPY•A rout in AI stocks followed signs that China is rapidly closing the technology gap, with South Korea’s KOSPI falling more than 7% and US chipmakers sliding 2.7%. Brent crude hovered near $106 a barrel as Middle East conflict kept inflation concerns alive.
1. AI stocks slide
A steep selloff in AI stocks weighed on markets after reports of rapid progress by Chinese rival ChangXin Memory Technologies raised the prospect that Chinese firms are closing the technology gap. South Korea’s tech-heavy KOSPI fell more than 7% to its lowest level since late July, while US chipmakers slid 2.7%.
2. Investors question returns
Investors remain concerned about the durability and profitability of the AI sector, including who will benefit from demand and how quickly heavy spending on AI infrastructure can generate returns. Fears about market concentration and those spending returns have triggered stock-market selloffs this year.
3. Other market pressures
The widening Middle East conflict kept Brent crude futures near $106 a barrel, sustaining inflation concerns and bond yields near multi-decade highs, although Treasuries drew safe-haven demand on Tuesday. European stock futures pointed to a lower open after LVMH reported weaker-than-expected third-quarter sales, while JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo were due to report results later in the day.
