Global markets opened Friday under heavy pressure after a brutal Wall Street session set off a
wave of selling across Asian trading floors. The Nasdaq Composite, which has powered this
year’s AI rally, fell 2.6% on Thursday for its steepest decline since early June, dragging the S&P
500 down 1.21% and sending shockwaves through tech-heavy exchanges in Tokyo, Seoul and
Hong Kong overnight.
At the heart of the sell-off is a question investors have been dodging for months: can the
hyperscalers actually earn back the money they are pouring into artificial intelligence?
Microsoft, Oracle, Amazon, Meta and Alphabet are on track to spend roughly $804 billion on AI
infrastructure this year alone, and this week’s results suggest the market’s patience with that
number is finally running thin.
Meta Platforms crystallised the mood. The company reported third-quarter revenue of $64.6
billion, up 26% year-on-year and comfortably above expectations. Shares fell about 7%. On any
ordinary week that would have been a story about a glittering earnings beat. This week it was a
story about capital expenditure guidance that spooked analysts into wondering how long before
margins start to crack.
Semiconductor names took the worst of it. The Philadelphia Semiconductor Index plunged
nearly 6%. Lam Research cratered 11.76% after warning that supply-chain constraints would
delay shipments, while Intel, AMD, Micron and Nvidia each shed more than 4%. For a sector
that spent most of 2026 trading like it could do no wrong, Thursday was a sharp reminder that it
very much can.
The ripple effect reached well beyond tech. Oil jumped as the Strait of Hormuz disruption
continues to bite, adding an inflation layer to the risk-off mood. Gold moved higher again, bond
yields slipped on safe-haven demand, and emerging-market currencies softened against a firmer
dollar. African markets will likely feel it on open through weaker local currencies and higher
import-cost expectations.
Investor letters hitting inboxes this morning are circling a familiar word: bubble. Few are quite
ready to use it in bold, but strategists at several major banks warned clients that AI-related names
have driven the lion’s share of 2026 index gains, which means a correction there mechanically
becomes a correction everywhere.
Not everyone is bearish. Bulls point out that AI revenue — not just AI capex — is still
accelerating at the biggest cloud providers, and that enterprise adoption is still in early innings.
Their argument is that this is a healthy valuation reset, not the start of a structural unwind.
That debate will dominate trading floors into next week’s Federal Reserve meeting, where every
word about rate cuts, liquidity and the AI build-out will be dissected. For now, the only certain
thing is that the easy-money phase of the AI trade is over, and both long-term believers and
short-term tourists are being forced to pick a side.
