Shares of major technology companies have fallen on concerns about the valuations of companies related to the artificial intelligence (AI) industry.
Investors have been increasingly wary of the so-called “AI bubble,” which has sent tech stock valuations to record highs this year.
Major indexes in Asia were the hardest hit on Wednesday due to the decline in the US. Japan’s exchange rate fell more than 3%, dragged down by a more than 10% plunge in tech investment giant SoftBank.
Concerns about AI’s valuation were also widespread in the United States after it was revealed that the trader who sparked The Big Short had bet $1.1 billion that the prices of AI stocks Nvidia and Palantir would fall.
“There is a sense of fatigue surrounding AI and investors are questioning the sustainability of the AI hype after the current poor performance. This has caused AI companies to languish in the market overnight,” said Farhan Badami, a financial analyst.
Markets around the world have rallied over the past year as investors poured chips into AI-related companies such as Nvidia, Intel and AMD.
Much of the rise in tech stocks has been linked to large investments in companies. Amazon shares, for example, hit an all-time high on Monday after the announcement of a $38bn (£28bn) deal with OpenAI.
But on Wednesday, the stock prices of many tech companies fell. Amazon’s stock price fell 1.84%, and Nvidia, the company recently valued at $5 trillion for the first time, fell nearly 4%.
Japan’s largest company, SoftBank, suffered the steepest decline in its stock price. This decline weighed particularly heavily on Japan’s Nikkei Stock Average.
The investment firm has invested heavily in AI development, pouring billions of dollars into technology companies such as OpenAI, Intel, and other companies in the space.
SoftBank’s decline has been attributed to a recent “sharp rise” in its stock, which investment analyst Vincent Fernando describes as a “double-edged sword.”
He said the surge could attract investors, but at the same time the stock price could fall whenever market sentiment changes.
“The market may be concerned that the company is overspending on AI and not getting enough return on that spending,” said Fernando of ZeroOne, an investment consultancy.
Tech stocks elsewhere in Asia were also hurt.
South Korea’s Samsung Electronics fell more than 4%, and the country’s stock index Kospi fell 2.85%.
TSMC, which makes chips for Nvidia, fell nearly 3%.
Badami, of financial services firm eToro, believes the correction in tech stocks will continue into next year.
