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

Investors fled to safety Friday as tech stocks plummeted and bonds surged on concerns over AI spending. Shares in Alphabet, the parent company of Google, plunged 12.6% on Wall Street, erasing nearly $500 billion in market value. Intel and Amazon shares also suffered significant drops, contributing to a 1.4% decline in Nasdaq 100 futures.

The market's woes extend beyond AI companies, with chipmakers seeing their stocks tumble in Asia. The root of the problem lies not in the financing of AI expansion, but rather in whether shareholders will reap adequate returns from the massive capital deployment. The plunge in tech stocks was compounded by a potential record hack at Binance, the world's largest cryptocurrency exchange, which also impacted bitcoin and other crypto prices.

In Japan, the Nikkei fell 3%, while South Korea's KOSPI dropped 5% for a 17% monthly decline. Despite the Federal Reserve's decision to keep US interest rates steady, the 10-year Treasury yield fell 7 basis points to 4.91%, marking the largest one-month drop since December 2023. The risk-averse sentiment drove investors towards haven currencies like the yen and Swiss franc, with the yen rising about 0.3% and the Swiss franc nearing a one-month high.