The FTSE 100 (^FTSE) and European stocks continued to tumble on Friday as a tech rout that has bruised Wall Street this week showed no sign of abating. According to IG, around $1tn (£737m) has been wiped from the market value of the S&P 500 software index after it posted a fall of 21% from its 200-day average.
It came as Amazon (AMZN) shares plunged in after-hours trade on Thursday, falling around 11%, as the company projected a surge of more than 50% in capital expenditures this year. It plans to pump $200bn into its AI efforts in 2026, joining other tech giants in a spending spree to build out artificial-intelligence infrastructure.
The news spooked investors, who are concerns about returns on the investment. Amazon, Microsoft (MSFT), Google (GOOG) and Meta (META) are expected to collectively spend more than $630bn on AI investments this year alone.
Charu Chanana, of Saxo Markets, said: “When AI starts to replicate tasks traditionally performed by professionals – drafting, analysing, coding, reviewing – it naturally raises questions about the long-term pricing power of certain software products.
“Investors are no longer impressed simply by the presence of AI features. This is why the pressure has shown up most clearly in (software as a service): it’s where the market is first forced to debate what AI will replace, who retains pricing power and who absorbs the costs of adoption.”
Investors are now rotating out of expensive growth stocks into more defensive, value-oriented sectors such as consumer staples, energy and industrials, with rising short interest and falling hedge fund exposure adding to pressure.
London’s benchmark index (^FTSE) was 0.4% lower in early trade
Germany’s DAX (^GDAXI) dropped 0.3% and the CAC (^FCHI) in Paris headed 0.4% into the red
The pan-European STOXX 600 (^STOXX) was down 0.2%
Wall Street is set for a negative start as S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all in the red.
The pound was 0.2% up against the US dollar (GBPUSD=X) at 1.3564
10,276.73 -32.49 (-0.32%)
As of 8:51:34 GMT. Market open.
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