Key facts
- World stocks dipped on Tuesday due to renewed concerns about the AI trade.
- Chipmakers were particularly affected, with South Korea's KOSPI sinking over 5%.
- Reports of progress by Chinese memory chip maker CXMT fueled competition fears.
- Broadcom CEO Hock Tan compared some AI sector flows to "casino gambling."
- Investors moved into government bonds, with the 10-year Treasury yield falling to 5.193%.
- European stocks rose, bucking the trend with the STOXX 600 up 0.5%.
World stocks declined on Tuesday as renewed concerns about the artificial intelligence trade hit chipmakers, prompting investors to seek the safety of government bonds. Tech-heavy markets in Asia and the United States were particularly affected.
Reports of progress by Chinese memory chip maker CXMT fueled worries about increased competition from China's AI players. Broadcom CEO Hock Tan further fueled sentiment by likening some of the flows into the broader AI sector to "casino gambling."
The MSCI's main world stocks index dipped 0.14%, while its broadest index of Asia-Pacific shares outside Japan fell more than 2% to its lowest level since late July. South Korea's KOSPI, a key market in the AI boom, sank more than 5%, its sharpest one-day drop since mid-August. Samsung fell 7.4% and SK Hynix dropped 10%. Taiwan's TSMC declined 1.8%, and AI investor SoftBank was 8% lower.
US Nasdaq futures fell 0.5%, with memory chipmaker Micron Technology down 2.5% and Nvidia dropping 0.6% in premarket trading.
Julien Lafargue, chief market strategist at Barclays Private Bank, noted that markets are increasingly aware that the chip industry, especially on the memory side, is cyclical. He suggested that the timeline for an uninterrupted sector might be shrinking, with fiercer competition potentially emerging as soon as next year.
European stocks, however, bucked the trend, with the pan-European STOXX 600 rising 0.5% to a one-week high, aided by limited exposure to the tech sector and a drop in oil prices.
In bond markets, the benchmark 10-year Treasury yield dipped to 5.193%, moving away from a 24-year high. Charu Chanana, chief investment strategist at Saxo Bank, described the move back into Treasuries as a "tactical rally," citing "sticky inflation, elevated oil prices and heavy government borrowing" as obstacles to a sustained bond recovery.
Oil prices eased, with Brent crude futures dipping 1.7% to $104.78 per barrel. The dollar also eased from 18-month highs against the euro and the Japanese yen.