In a striking scene that reveals the fragility of the rapid gains seen across financial markets in recent weeks, global markets turned red on Tuesday as a sweeping sell-off engulfed technology, artificial intelligence, and semiconductor stocks, spreading from Wall Street to Tokyo, Seoul, London, and Frankfurt, erasing much of what markets had accumulated during consecutive sessions of gains.
The first spark came on Monday, when shares of major technology companies began to fall, led by Alphabet's stock, before losses accelerated on Tuesday and spread horizontally to Asian and then European markets, before returning to intensify pressure on the US market.
The common thread across all these markets was one: growing fears that the Federal Reserve may raise interest rates once or more before year's end, at a time when AI companies are weighed down by the debt they have taken on to finance their massive expansion projects.
Japan retreats from the summit
Investors paid the price today following yesterday's record high on the Nikkei, as the index fell 3.55% to close at 69,788 points, snapping an eight-session winning streak and recording its lowest level in a full week, after having surpassed the 72,000-point barrier for the first time in its history on Monday. In the same vein, the broader Topix index fell 2.6% to reach 3,990 points.
Losses were led by AI and semiconductor stocks, which had been the main driver of gains in previous sessions, in what appeared to be a sudden correction following exaggerated gains.
The most notable losers were Kioxia, the memory chip company, whose shares plunged 15.1%, and Furukawa Electric, which collapsed 15.5%, while shares of technology investment giant SoftBank Group fell 10.1%, and Mitsui Kinzoku dropped 12.6%.
In this context, Masahiro Ichikawa, chief market analyst at Sumitomo Mitsui Asset Management, commented that