European shares join a global sell-off as AI spending fears rattle Wall Street and Asian markets

European shares experienced a significant decline on Friday as global markets grappled with concerns over artificial intelligence (AI) stock performance and potential regulatory constraints. Fears of curtailed AI data-center spending intensified following the Democrats' victory in the recent US midterm elections, which led to a shift in investor sentiment.

The pan-European STOXX 600 index suffered a 1.6% drop in early trading, erasing its weekly gains. Major European markets, such as media, healthcare, and retail sectors, witnessed declines of over 1%. Previously, European markets had shown resilience due to relatively lower exposure to AI stocks compared to Asian and US counterparts.

Prior to this, Japanese and South Korean shares plummeted after a massive tech stock sell-off on Wall Street the previous day; Tokyo's Nikkei 225 index fell by 5.5%, and Seoul's Kospi index plunged as much as 8.8%, triggering a circuit breaker that halted trading for 20 minutes. Taiwan's TAIEX index also declined by more than 8%.

Key AI-related companies, including Samsung Electronics, SK Hynix, and Taiwan Semiconductor Manufacturing Company (TSMC), faced substantial losses, with Samsung falling nearly 10% and SK Hynix dropping over 11%. In the US, tech stocks, particularly those involved in AI infrastructure development, took a severe hit on Thursday. The Nasdaq lost 5.52%, eroding $2.5 trillion in market value, while the S&P 500 index plummeted 4.4%.

Investors grew increasingly anxious about the AI spending plans and their potential impact on long-term profits. The US electoral outcome, where Democrats gained control of both houses of Congress, further fueled concerns about possible government restrictions on AI development and data center construction. Michael McCarthy, CEO of Moomoo's Australia and New Zealand division, noted the significant shift in market sentiment, emphasizing the market's tendency to react sharply to significant events. The recent sell-off indicates a growing bearish trend in global markets.