Global stock market sell-off deepens amid worries over AI spending drive

UK stocks have fallen sharply as the global sell-off deepens amid worries about an ongoing AI spending splurge.

London’s FTSE 100 fell by around 100 points, down about 1%, shortly after markets opened on Tuesday.

European stock markets also sunk into the red in early trading, with Germany’s Dax down around 1% and France’s Cac 40 tumbling by about 1.5%.

This followed another day of losses in the US and a bruising session for Asian stock markets overnight, with Japan’s Nikkei 225 dropping by more than 3%.

Global markets are facing several consecutive days of losses, with investor sentiment being shaken by broader scrutiny of the tech and AI sector.

Some people are worried about the level of investment into AI, which has ramped up in recent months and years, and the fact that investor returns will take time to be realised.

It also comes ahead of chip-maker Nvidia publishing its latest earnings report on Wednesday, fuelling nervousness among investors of the AI giant.

On Tuesday, the head of Google’s parent firm Alphabet said no company was “immune” to the impact of an AI bubble bursting.

Sundar Pichai said in an interview with the BBC that there was “well over a trillion dollars of investment going in building the infrastructure” for AI across all companies.

Mr Pichai said the level of investment into the technology was “both rational and there are elements of irrationality through a moment like this”.

Russ Mould, investment director for AJ Bell, said: “Another downbeat session on Wall Street yesterday was followed by heavier selling in Asia today and that set the scene for a meaningful drop in the FTSE 100.

“As fears over an AI bubble build, there has rarely been more riding on an individual set of results than Nvidia’s on Wednesday.

“Even a mild disappointment could reinforce the market’s worries and spark a wider sell-off.”

The price of bitcoin also continued to decline on Tuesday, falling below 90,000 US dollars (£68,400) to its lowest price in nearly seven months.

Victoria Scholar, head of investment for Interactive Investor, said losses were being “fuelled by concerns about overvaluations in the tech sector and broader risk-off sentiment that is causing a ripple effect across global markets”.

She said: “This year was meant to be the year of the bitcoin bulls supported by a highly crypto-friendly administration in the White House and Trump’s ‘less is more’ approach towards regulation.

“However, fears of an AI bubble and concerns about the market’s heavy dependence on a handful of tech giants have caused investors to dial back their exposure to speculative assets such as bitcoin.

“There’s a general sense of nervousness that has captured the market mood lately and bitcoin appears to be in the firing line.”