Global Equities Decline Amid Concerns Over AI Sector and Tech Valuations
Global equities have declined for a fourth consecutive day as concerns about technology valuations continue to weigh on markets. Asia-Pacific indices have reached one-month lows with the MSCI ex-Japan down 1.8%, the KOSPI falling 3.5%, the Hang Seng dropping 1.9%, and the Nikkei slipping over 3%. The US stock market also fell, with the S&P 500 closing at its lowest level in a month.
Investors are closely watching Nvidia's earnings report due Wednesday night, weighing the risks in the AI sector and the prospects for monetisation amid significant infrastructure spending. AI infrastructure funding is increasingly debt-financed; Amazon recently raised $15 billion in its first USD bond offering in three years as part of a broader wave of jumbo debt sales by tech firms including Meta and Alphabet.
Sundar Pichai has warned that no company will be immune if the AI bubble bursts, describing AI growth as extraordinary yet noting episodes of irrational exuberance. Bitcoin has dropped to a seven-month low of around $89,286, down approximately 29% from its October record, with analysts pointing to its volatility as a risk indicator. Investors are also concerned that US interest rates may not be cut as quickly as hoped, following hawkish central bank commentary.
The debt-fueled expansion in AI raises questions about the sustainability of monetising such spending. Upcoming events include a Treasury Committee crypto hearing at 10:00 GMT, a speech by the Bank of England's chief economist Huw Pill at Skinners Hall at 13:00 GMT, and US factory orders and durable goods data for August at 15:00 GMT, delayed by lockdown.
