Global stock markets plummet: fear of AI bubble and inflation growing

The turmoil in the financial markets continues to increase. US technology stocks will take another big hit on Thursday, while the Asian stock markets are also under heavy pressure. Investors are increasingly concerned about the huge investments in artificial intelligence (AI) and disappointing inflation figures from the United States. Meanwhile, investors are seeking refuge in gold, which is rising sharply in value.

On Wall Street, the technology sector is under particular pressure. The Nasdaq Composite, which includes many technology companies, will lose about 0.8 percent on Thursday. The Nasdaq-100, which consists of one hundred large non-financial companies, is down 1.15 percent. The broader S&P 500 loses 0.24 percent and stands at about 7,700 points. The Dow Jones holds up remarkably better and rises by about half a percent according to previous market data.

The losses follow a weak trading day on Wednesday. Especially companies that are closely involved in the development of AI are being hit hard. Investors are increasingly wondering whether the billions invested in data centers, chips and other AI technology will ultimately yield sufficient profits.

One notable victim is CoreWeave, a company that provides computing power for AI applications. The share already lost about fifteen percent on Wednesday and falls again by about seven percent on Thursday. Chip manufacturers are also having a hard time. AMD is losing about five percent and memory chip maker Micron is down about four percent.

The sales wave is not limited to the United States. In South Korea, the Kospi is losing almost eight percent, while the Japanese Nikkei is down about five percent. Large Asian chip companies are also hit. Samsung is losing almost ten percent and SK Hynix is down about eleven percent.

In addition to the doubts about AI, US inflation is also causing unrest. New figures show that producer prices rose by 1.3 percent in September compared to August. Economists had expected an increase of only 0.6 percent. On an annual basis, the increase is even 6.3 percent, compared to an expected 5.5 percent.

That's bad news for investors hoping for lower interest rates. Producer prices indicate how much companies pay for goods and services before they reach consumers. When those costs add up quickly, companies can decide to raise their prices. As a result, there is a risk that inflation will remain high for longer.

Earlier, US consumer prices were also higher than expected. The combination of both figures increases the uncertainty about the interest rate policy of the Federal Reserve (Fed). Investors fear that the central bank will have to keep interest rates high for longer in order to get inflation under control.

According to market expectations, there is now about a 75 percent chance that the Fed will leave interest rates unchanged at the October 28 meeting. Higher interest rates make borrowing more expensive and can slow economic growth. Technology companies in particular are sensitive to this, as their valuations are often highly dependent on expected future profits.

As equities lose ground globally, gold benefits from the uncertainty. The price of gold is now rising by about 1.2 percent on Thursday. Earlier in the day, the increase rose to 1.7 percent, with the gold price reaching $4,177 per troy ounce. The precious metal is traditionally seen as a safe haven when investors are concerned about the economy or financial markets.

Nervousness is also visible on the bond market. The interest rate on US government bonds with a ten-year maturity falls to 5.06 percent. At the same time, the US dollar is weakening. On the contrary, the oil price is moving down: Brent oil is losing about two percent and comes out at around 105 dollars per barrel.

These developments are also important for the crypto market. The Bitcoin price regularly reacts to changes in interest rate expectations and risk sentiment. If investors want to take less risk, this can also put pressure on digital coins. The coming inflation figures and the Fed's interest rate decision therefore remain important moments for both equity investors and crypto traders.