Tech sell-off rolls on as hot inflation data stokes rate worries

LONDON — Asian stocks plunged and the sell-off in tech stocks continued on Wall Street on Thursday as investors worried that forecast-topping U.S. inflation data would force the Federal Reserve to raise interest rates again.

“A glance across major U.S. equities this morning shows that the tech sell-off is still in progress,” said market analyst David Morrison at Trade Nation.

“Once again, chip stocks are in the forefront of the current round of derisking,” he added.

Shares in AI chip giant Nvidia shed 2.2 percent.

Those in rivals AMD and Marvell were both down around four percent in late morning New York trading.

Shares in AI data centre infrastructure company CoreWeave fell 3.6 percent after plunging 15.5 percent on Wednesday.

The company is a big client of Nvidia chips and Nvidia is a major shareholder.

The Nasdaq Composite, which has the heaviest exposure to tech stocks, shed 0.3 percent.

The blue-chip Dow rose, however.

“Rotation out of highly speculative AI infrastructure into established sectors helped the Dow gain over half a percentage point,” said IG analyst Axel Rudolph.

European stock markets were more resilient, benefitting from their lower exposure to the tech sector.

Seoul and Tokyo bore the brunt of the selling in Asia as traders bailed out of chipmakers, tracking sharp losses on Wall Street on Wednesday.

Seoul’s Kospi dived more than eight percent — leading to a brief trading halt — before slightly paring the losses, with semiconductor firm SK hynix sinking more than 11 percent and Samsung more than nine percent.

Tokyo shed close to five percent, driven by sharp falls for Advantest, Kioxia and investment titan SoftBank.

“The tech sell-off has continued with pace, exacerbated by U.S. inflation data which increased expectations for U.S. interest rate hikes this month,” said Dan Coatsworth, head of markets at AJ Bell.

“US Treasury bond yields fell, suggesting that investors are moving into supposed lower-risk assets,” he added.

Markets, already struggling with concerns about the outlook for the AI investment boom, were stung after data released on Wednesday showed the U.S. consumer price index jumped more than expected to 3.7 percent in September.

Figures released on Thursday showed U.S. wholesale inflation surged past analysts’ expectations in September — the 6.3 percent increase from one year ago — marking its biggest year-on-year jump since 2022 as petrol prices rocketed due to the war with Iran.

The inflation figures put pressure on the Fed to raise rates at least once more following September’s hike.

The bank’s decision is due on October 28, a week before the U.S. midterm elections.

Tech firms rely heavily on borrowing to fund their huge AI investments, meaning they are particularly sensitive to higher interest rates.

Saxo UK investor strategist Neil Wilson pointed to “worries about the AI buildout, bubbly valuations, lower-than-expected earnings growth at leading U.S. frontier labs, Chinese competition” as additional factors behind the tech selling.