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

Tech stocks suffered a sharp decline on Friday, with major AI companies' spending causing investor concern. Alphabet shares dropped 12.6% and fell further after hours, erasing $500 billion in market value. Intel and Amazon also saw significant drops, contributing to a 1.4% decline in Nasdaq 100 futures. The market's worry wasn't solely about AI financing, but whether investors would see adequate returns on the capital being deployed.

A potential record-breaking hack at Binance added to the market's unease, causing Bitcoin and other cryptocurrency prices to plummet, along with rival exchange Coinbase's stock. Asian markets saw significant drops: South Korea's KOSPI fell by 5% for a more than 17% monthly decline, Japan's Nikkei sank 3%, and China's CSI300 headed for its largest monthly loss in a decade due to fears of a chip and data center equipment demand slowdown.

The Federal Reserve's decision to keep US interest rates on hold without a clear timeline for future hikes fueled a rush into bonds. The 10-year US Treasury yield fell by more than 7 basis points, marking the largest one-month drop since December 2023. The Bank of Japan is expected to keep rates steady, which will likely keep haven currencies like the yen and Swiss franc strong.

Investors will closely monitor the Bank of Japan's assessment of monetary policy and potential future rate hikes in 2027.