A Halloween sell-off in technology shares has stoked fears of a market crash that could hit the savings and pensions of millions of British households.
Trading was especially bruising in New York, where the tech-heavy Nasdaq extended Thursday’s 1.4 per cent decline with a fall of more than 3 per cent on Friday.
Analysts described the session as ‘tech carnage’, with US giants Amazon and Intel among the biggest casualties after disappointing results were released on Thursday evening.
Intel shares plunged almost 30 per cent, erasing about £90billion from its market value, while Amazon dropped by more than 3 per cent.
The latest wave of selling followed a more than 12 per cent collapse in shares of Google owner Alphabet on Thursday night, wiping nearly £400billion from its value.
Alphabet, one of the so-called Magnificent Seven technology companies, has now fallen 30 per cent from its May peak. The Nasdaq is down 7.5 per cent, reducing its value by £2.25trillion.
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Several US technology shares that surged to record levels this year amid enthusiasm for artificial intelligence have now entered ‘bear market’ territory, meaning they have fallen more than 20 per cent from their peaks.
The FTSE 100 has so far weathered the turbulence, helped by its relatively limited exposure to technology and artificial intelligence companies.
London’s blue-chip index rose 0.2 per cent to 10,744 on Friday morning, despite the turmoil across Wall Street.
However, the technology rout is still likely to be felt by millions of British investors with exposure to US markets through their pensions and ISAs.
Many of the country’s most widely held investments—including technology funds, investment trusts and funds tracking major global indices—are heavily weighted towards US shares that have recently fallen sharply.
Neil Wilson, investor strategist at Saxo, warned of ‘tech carnage as October wraps up’ as investors question whether the billions being spent on AI infrastructure, including data centres, will generate sufficient returns.
He said: ‘This is starting to look quite ugly. The sell-off looks a bit indiscriminate and shows that investors don’t just want capex, they want to see the returns already.’
The AI investment boom has encountered growing resistance as shareholders become increasingly concerned about the billions Big Tech companies are committing to expand their AI infrastructure without clear evidence of stronger profits.
Several companies have also turned to bond markets to fund the spending, heightening fears that debt-backed investment will be more difficult to defend if borrowing costs increase.
Jake Behan, head of capital markets at Direxion, said the recent share-price falls offered ‘a good example of how the AI trade has changed’.
He added: ‘At this point, the market isn’t just asking how fast you can grow. It’s asking what you have to spend to get there.’
The AI trade received a short-lived boost earlier this week after AI company Anthropic, which developed the Claude model, announced plans for a US stock-market listing at a valuation of up to £1.5trillion.
Russ Mould, investment director at AJ Bell, said: ‘The FTSE 100’s lack of tech exposure has proved to be a blessing in disguise.
‘The UK index is standing tall amid a global tech sell-off. Helped by record profits from index heavyweight BP and a well-received update from pharmaceutical giant AstraZeneca, it achieved a healthy gain on Friday. That came after heavy selling on Wall Street and in parts of Asia as concerns over AI spending intensified.
‘Companies viewed as potential victims of AI disruption in the software and data sectors, including Sage and Relx, advanced enough to offset weakness among miners and London’s small group of technology and AI-related shares. Miners are connected to the AI theme because copper is an important component of data centres.
‘Chancellor John Healey will be pleased that the positive response to his Budget in currency and bond markets has not unravelled, with the pound higher and gilt yields easing. Oil prices remain elevated, although they are below the highs reached earlier in the week.’
What does the tech stock rout mean for you?
Millions of British savers have exposure to US technology shares, even if they are unaware of it.
Companies including Nvidia, Alphabet, Apple, Meta, Amazon and Intel feature in countless global funds that underpin pension investments.
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When those shares fall, the value of nest eggs belonging to both workers and pensioners can decline too.
Dan Coatsworth, head of markets at AJ Bell, said: ‘The tech sell-off matters to investors around the world because the AI theme has spread through countless sectors and regions.
‘The US stock market is home to the world’s largest technology companies and represents a major part of the global funds held in so many investment portfolios.
‘As a result, investors may have a substantial exposure to Big Tech without realising it.’
He noted that the US accounted for half of the MSCI World global stock-market benchmark 15 years ago. Today, its share is 73 per cent.
Technology is the index’s largest sector, representing more than 30 per cent of its value.
‘If technology falls out of favour, global funds may not offer the diversification that some investors expect,’ Coatsworth said.
