As AI stocks surge, investors say not to panic just yet

Wall Street’s main indexes were soft at the open on Wednesday, following a tech-led selloff in the previous session due to rising valuation concerns.

At the opening bell, Wall Street’s main indexes were subdued: The Dow Jones Industrial Average rose 0.03 percent to 47,097.31, the S&P 500 fell 0.03 percent to 6,769.77, while the Nasdaq Composite added 0.04 percent to 23,358.075.

But the selloff in global markets continued for a second day on Wednesday, sending markets in Seoul and Tokyo down nearly five per cent from Tuesday morning’s highs.

The decline in technology stock prices over the past day is cause for caution, but no reason to panic just yet, say brokers and investors who are riding the runaway market to record highs and somewhat inflated valuations.

The biggest winners of the rally have been hit the hardest, taking chipmaker Nvidia from a niche player to the most valuable company on Earth.

“The selloff appears to be largely position-driven, with the recently outperformed names the worst performing,” said John Wither, senior portfolio manager at Pictet Asset Management in Singapore.

There was no obvious trigger for the pullback, which began with an unexpectedly negative reaction to strong financial results from Silicon Valley data and artificial intelligence firm Palantir Technologies.

Shares in the market darling were down nearly eight percent on Tuesday, and fell another three percent in extended trading.

“That’s why people have their noses up to these AI stocks,” said Harald van der Linde, head of equity strategy for Asia Pacific at HSBC. “But how much further can they go? How much more can they buy? And I believe what we’re going to see is a breather… and the breather may come with a rotation.”

On Tuesday, Nvidia shares fell nearly four percent on Wall Street and were trading about seven percent below last month’s peak. Meanwhile, suppliers, competitors and companies involved in the AI ​​supply chain in Asia were dealt a blow on Wednesday.

“It’s quite broad selling in the risk-leveraged part of the market, which we see as short-term profit-taking,” said Angus McGeoch, Barrenjoy’s head of equity distribution for Asia in Hong Kong.

He said fund managers with an eye on 2025 results would be quick to exit the recession at this time of year, but are not looking for wholesale exits yet.

“Obviously (they) don’t want to give up a lot, given that the year has been good… but if the market feels like it wants to go again, I don’t think it’ll take much to get people back involved.”

Fear of AI bubble

The market has been reeling from months of concerns over high interest rates, stubborn inflation, trade turmoil and a poor global economy, raising questions about whether the artificial intelligence boom is over. a bubble waiting to burst,

The Nasdaq rose more than 50 percent from its April low after falling two percent on Tuesday.

Wall Street leaders Ted Pick of Morgan Stanley and David Solomon of Goldman Sachs voiced some unease in the markets and raised the possibility of a withdrawal at an investment summit in Hong Kong.

Big-name investor Michael Burry, who famously predicted the collapse of the US housing bubble that led to the 2008 financial crisis and is depicted in the film The Big ShortIs Bet against both Nvidia and PalantirWhich has fueled fears about the bubble.

The move comes just days after the acquittal Posted on xSaying “Sometimes we see bubbles. Sometimes, something has to be done about it. Sometimes, not playing is the only winning move.,

Additionally, South Korea’s stock exchange cautioned against investing in chip maker SK Hynix – a routine warning for a stock that had tripled in 12 months but was enough to trigger a six percent decline in two days.

Matthew Haupt, lead portfolio manager at Wilson Asset Management in Sydney, saw the slowdown as investors were taking money off the table ahead of a US Supreme Court hearing on the legality of the tariffs on Wednesday.

“I’m buying today,” he said. “I hope I’m right.”