Don’t panic yet, investors say as hot AI stocks fall
The sharp decline in technology share prices is cause for caution but not panic, say brokers and investors who have driven the market wildly to record highs and some stretched valuations.
The selling extended into a second day on Wednesday leaving bourses in Seoul and Tokyo about 5% below the peaks reached early Tuesday. futures fell 0.2% after the index fell 2% on Tuesday.
Worst affected are the biggest winners in a rally that has transformed chipmakers from niche players into the most valuable companies on earth.
“This sell-off appears to be largely driven by positioning, with recent better-performing names taking the worst action,” said Jon Withaar, senior portfolio manager at Pictet Asset Management in Singapore.
There is no clear trigger for this decline, but it started with an unexpected negative reaction to strong financial performance at Silicon Valley data and artificial intelligence companies.
Shares in the darling market ended down nearly 8% on Tuesday, and were down another 3% in extended trading.
“So people are very interested in these AI stocks,” said Herald van der Linde, head of equity strategy for Asia Pacific at . “But how much further can they go? How much more can they afford? And my belief is that what we’re going to see is a lull… and the lull could come in waves.”
On Tuesday, Nvidia shares fell nearly 4% on Wall Street and traded down about 7% from their peak last month, while suppliers, competitors and companies across the AI supply chain took a hit in Asia on Wednesday.
“This is a complete sell-off in the risk-leverage market, which to us looks like short-term profit-taking,” said Angus McGeoch, Barrenjoey’s head of equity distribution for Asia in Hong Kong.
He said fund managers watching their 2025 results would be quick to avoid the current downward trend, but were not yet looking for a major exit.
“Obviously (they) don’t want to throw in the towel, considering it’s been a good year…, but if the market looks like it wants to get back on track, then I don’t think it will take much to get people back involved.”
‘Wobble’
Markets have for months managed to overcome concerns about rising interest rates, volatile inflation, trade turmoil and an unstable global economy, raising questions about whether the artificial intelligence boom is a bubble waiting to burst.
To be sure, the Nasdaq’s 2% decline on Tuesday followed a gain of more than 50% from its April lows.
But Wall Street leaders Ted Pick of Morgan Stanley and David Solomon voiced some unease in markets and raised the prospect of a setback at an investment summit in Hong Kong.
Additionally, the South Korean stock exchange warned against investing in the chipmaker – a routine warning for a stock that has tripled in 12 months but was enough to trigger a 6% drop in two days.
Matthew Haupt, principal portfolio manager at Wilson Asset Management in Sydney, sees the drop as investors fleeing funds ahead of Wednesday’s US Supreme Court hearing on the legality of the tariffs.
“I bought it today,” he said. “I hope I’m right.”
Source: Reuters
