Global tech selloff deepens as AI spending concerns trigger market rout

Global tech stocks continued to decline on Friday due to disappointing earnings reports and worries over spending on AI technology. Nasdaq futures suffered a 2% drop before the opening bell on Wall Street, and S&P 500 futures followed suit, falling by 0.9%. The negative trend started earlier in the week, with technology shares sliding sharply on Thursday.

Alphabet, the parent company of Google, saw its stock drop 13%, wiping out around $500 billion in market value. Investors are questioning the long-term viability of Alphabet's AI investment strategy and the potential impact of AI-powered search on its advertising revenue. The selling momentum intensified after Amazon released weaker-than-anticipated sales figures, causing its shares to plummet 6.6% in pre-market trading.

Chipmakers were also hit hard by the market downturn. Amazon's rival Amazon reported lower-than-expected earnings, prompting a 6.6% decline in its stock price during the early trading session. Intel experienced a 26% drop after delivering a less-than-impressive forecast.

The turmoil extended across Asia, with Japan's Nikkei 225 index declining 2.1%, and South Korea's Kospi falling 3.5%. SoftBank Group, a Japanese tech conglomerate, fell 6%, extending its loss from its June peak to 48%. Semiconductor manufacturers SK Hynix and Samsung Electronics also suffered, with their stocks falling by 7.1% and 3%, respectively.

European chipmaking equipment company ASML also saw a 4.9% decline in early trading. The market-wide sell-off indicates a broader reassessment of AI-related valuations as investors become more cautious about the returns generated by massive infrastructure investments.

Only Apple, Microsoft, and Nvidia have been positively performing among the Magnificent Seven US technology stocks since Thursday's losses. The renewed volatility presents a challenging environment for technology-focused hedge funds and systematic strategies with exposure to AI-related equities. However, it may present short-selling and market-neutral managers with opportunities to profit from the widening performance dispersion across the sector.