Economists are sounding the alarm over the impact AI-led tech firms are having on the wider stock market
The stock market has been hit by an artificial intelligence (AI) "bloodbath" as tech-sector companies experienced a significant sell-off.
Technology-focused equities bore the brunt of the selling pressure, with semiconductor manufacturers suffering the steepest losses following their rally earlier this year.
Once trading on Wall Street opened earlier today, the tech-heavy Nasdaq Composite dropped 1.9 per cent, marking its most severe single-day decline in four weeks.
Kei Okamura, portfolio manager at Neuberger Berman, told The Telegraph: "The word 'bloodbath' is accurate because it is across the board."
Investors have grown increasingly sceptical about the lofty valuations attached to firms riding the AI wave. Asian markets had already set the tone for the global rout before trading began in New York.
Japan's Nikkei 225 benchmark tumbled four per cent on Friday, extending its losses to more than 10 per cent since reaching a record peak on June 25.
The damage proved even more severe in Taiwan, where the Taiex index plummeted 6.5 per cent. Taiwanese chipmaker TSMC, valued at $2trillion (£1.4trillion), saw its shares slide 7.3 per cent despite reporting record profits for the second quarter just a day earlier.
Higher-than-anticipated spending plans appeared to unsettle investors. Jim Reid, analyst at Deutsche Bank, said: "Global equities are continuing to slump, as fresh doubts about the AI trade have driven a pronounced sell-off in tech stocks."
Notably, a breakthrough from Beijing-based startup Moonshot added to the pressure on technology shares in Hong Kong and beyond.
The company unveiled Kimi K3 on Friday, claiming it represents the world's largest open AI model measured by parameter count, a metric indicating computational complexity.
Moonshot said its system performs at levels comparable to tools developed by American firm Anthropic. Industry analyst Lian Jye Su noted that Chinese AI models are attracting interest due to their significantly lower operating costs.
He said: "They can be run at a fraction of the cost that OpenAI charges its client."
Renewed hostilities in the Middle East have compounded market anxieties, driving crude prices up more than 15 per cent this month to exceed $85 per barrel.
The semiconductor sector's recent record-breaking quarter, fuelled by voracious demand for AI technology, now faces questions about whether massive capital outlays will ultimately prove worthwhile.
Concerns about heightened competition and potential overcapacity have sparked fears that chip stocks may be entering bear market territory.
David Morrison, senior market analyst at Trade Nation. said: "The question now is whether this will become yet another 'buy the dip' opportunity, or if the pace of selling accelerates as everyone rushes to the exit doors at the same time."
