7:16am: FTSE 100 calms down from AI scare
The FTSE 100 edged higher on Wednesday after the pre-market session was hit by some panic selling on both sides of the Atlantic.
London’s Premier Share Index is expected to rise 16 points after falling almost 27 points a day earlier to end at 10,314.59, according to futures markets.
Overnight, the tech-heavy Nasdaq fell 1.4%, the S&P 500 fell 0.8%, most of the “Mag 7” tech giants lost ground, and the Dow Jones fell 0.3%.
Asian stocks were mixed this morning, with Japan’s Nikkei average retreating from its highs, but Chinese and Hong Kong stocks rising.
Ipek Ozkardeskaya, market analyst at Swissquote Bank, summed up yesterday: “The relief that the decline across the metals industry eased lasted until news broke that Anthropic, an AI startup backed by Amazon and Google, had rolled out a new AI tool designed to handle legal and investigative tasks traditionally done using paid databases.”
“The announcement spooked the market, causing a sharp selloff in software companies that sell data analytics and decision-making tools to lawyers, banks, and corporations, driven by concerns that AI and new players are coming to lunch, and the pace is accelerating.”
As such, he said the day saw a new wave of selling, particularly among software companies, with RELX and London Stock Exchange Group plunging 14% and 12% in Europe, while Thomson Reuters fell 15% and shares in Experian, Pearson and Sage were also caught up in the move, before FactSet, Salesforce and Adobe were sold off in the US.
“Adobe, for example, fell to its lowest level in nearly six years as the advent of AI increased competition to a level that seriously threatened some of the company’s core businesses. Larger companies were also hurt. Microsoft fell 2.87% and is now at its lowest level in November. It’s down about 25% from its peak. Broad technology also took a hit. Even Google, one of the hottest AI stars at the moment, fell 1.22% after hitting a new high. ”
Next, Google and Qualcomm will report after the New York closing bell and before Amazon releases its results on Thursday.
“By the end of the week, we should see more clearly where the AI hype is heading. So far, the market has welcomed few positive results. Even Meta has been unable to maintain after-earnings profits despite realizing revenue growth related to its AI investments,” Ozkardeskaya said.
