Stocks slump, bonds leap as AI giants’ spending spooks investors

Alphabet shares plummeted 12.6% on Wall Street and fell even more after markets closed, erasing a staggering US$500 billion in market value due to an unsustainable cash flow caused by ballooning AI spending. This dramatic 12.6% dip in shares came as tech stocks across Asia tumbled, with Intel shares dropping 23% in aftermarket trading and Amazon shares falling 7%.

The Nasdaq 100 futures index experienced a 1.4% decline, sending chipmaker stocks into a sharp decline throughout Asia. Analysts are more concerned about whether investors will see a sufficient return on their investments in the massive AI spending rather than questioning the feasibility of the AI buildout. The recent hack targeting Binance, the world's largest cryptocurrency exchange, exacerbated concerns, causing bitcoin and other crypto prices to plummet along with rival exchange Coinbase's stocks.

Asian stock markets suffered heavily, with South Korea's KOSPI falling 5% for a monthly loss greater than 17%, Japan's Nikkei dipping 3%, and China's CSI300 on track for its largest monthly decline in a decade due to mounting fears about a potential slowdown in demand for chips and data center equipment. The Federal Reserve's decision to keep U.S. interest rates steady, without a clear timeline for future hikes, further fueled the rush into bonds.

This move was bolstered by the Bank of Japan's expectation to maintain rates, adding to the flight to safety in haven currencies like the yen and Swiss franc.