However, other major tech companies traded higher: Nvidia rose 7%, Microsoft gained 1% and Tesla rose 4%. The benchmark S&P 500 rose 1.6%, while the Nasdaq rose 2%, although both indexes are likely to end the week lower.“The market’s view is that the AI add-on business, and the way they’ve been driving all this revenue forward for many, many years, that’s just become too expensive,” said Andrew Wells, chief investment officer at SanJac Alpha in Houston. “It’s not that the trade is over, but it became too expensive to bring forward all these potential future revenues and not really factor in the risk. So it’s a de-risking trade.”
Nvidia CEO Jensen Huang attributed the increase in spending to “skyrocketing” demand. Speaking on CNBC’s “Halftime Report,” he called the increase appropriate and sustainable.
Meanwhile, shares of data analytics companies remained ‘under selling pressure’ on concerns they face an existential threat from powerful new AI models.
Canada-based Thomson Reuters, which suffered a record one-day decline earlier this week, fell 0.7%. London-listed shares RELX lost 4.6% and fell 17% in their worst week since 2020. The S&P 500 software and services index is down almost 8% this week and has seen about $1 trillion in market value evaporate since Jan. 28.
“Headlines that would have pushed stocks to new highs during the height of AI optimism are now being interpreted much more cautiously by investors,” said Carlota Estragues Lopez, equity strategist at St. James’s Place in London.
“It’s not just the return on investment that worries investors, but also the risk of limited market leadership that struggles to reach beyond a handful of mega-cap names.”
SHOCK FOR DATA ANALYSIS COMPANIES
A sell-off among software, data and analytics companies was caused by a new plug-in from Anthropic’s Claude.
Shares of the London Stock Exchange Group regained some ground on Friday, but their price still fell almost 8% this week in a second straight week of sharp losses.
This week’s decline in AI-exposed stocks has weighed on broader equity markets. Global shares are on track to fall 0.33% this week. The rout was especially acute in India, where shares of software exporters fell another 2% on Friday, ending a week that saw $22.5 billion in market value losses.
Investors’ nerves about potential AI-induced disruption coincide with a growing tendency to punish big tech companies for signaling even higher spending on the technology. Google parent Alphabet also increased its spending plans on Thursday, sending its shares as much as 8% lower at one point, though they ended the day flat.
“Both Alphabet and Amazon delivered strong underlying business performance, driven by better-than-expected growth in cloud. But that wasn’t enough to distract markets from their growing capital investment plans,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.
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