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

European equities plummeted on Friday amid a worldwide sell-off triggered by worries surrounding artificial intelligence stocks, which propagated from Wall Street to Asian and European markets. Concerns over curtailed AI data-center spending compounded investor unease following Democrats' acquisition of control of both chambers of the US Congress.

The pan-European STOXX 600 index plunged 1.6% in early trading, erasing its weekly gains. Major European markets, including media, healthcare, and retail sectors, exhibited declines above 1%. Previously, European markets had managed the week's volatility better than Asia and the US due to comparatively limited exposure to AI stocks.

Earlier, Japanese and South Korean shares experienced significant drops after a massive tech stock sell-off on Wall Street the previous day. Tokyo's Nikkei 225 index fell 5.5% in early trading, while Seoul's tech-heavy Kospi index slipped as much as 8.8%, prompting a circuit breaker that suspended trading for 20 minutes. Taiwan's benchmark TAIEX index also fell over 8%.

Tech giants such as Samsung Electronics, SK Hynix, and Taiwan Semiconductor Manufacturing Company (TSMC) suffered the most significant losses due to AI-related selloffs. Samsung declined nearly 10%, and SK Hynix slipped over 11%. Chip-related shares in Japan experienced a sharp decline, with Tokyo Electron stock trading down around 9% and Kioxia shedding 13%.

In the US, markets were severely impacted on Thursday by a sharp retreat in tech stocks, particularly those involved in AI infrastructure like data centers. The Nasdaq fell 5.52% and lost $2.5 trillion in market value, while the broader S&P 500 index plummeted 4.4%. The decline occurred as investors grew increasingly apprehensive about the substantial AI spending plans and their potential to generate commensurate profits.

The results of the US midterm elections, which saw Democrats gain control of both houses of Congress, further fueled these concerns. Some Democratic governors-elect campaigned on restricting AI development and promised to halt data center construction due to rising public opposition. Market analyst Michael McCarthy stated, "It's pretty clear there's been a real shift in sentiment."

He added, "Market turning points are often accompanied by strong disagreement, and that shows up in the market by huge swings in either direction," which was evident in yesterday's sharp sell-off.