Stocks in retreat as traders reconsider tech investment

HONG KONG, Feb 5 (AFP): Stocks mostly fell on Thursday to track more losses on Wall Street, where tech firms were again under pressure as fears over vast AI investments and extended valuations gained momentum.
While the extreme volatility that greeted the start of the week has calmed, traders remained on edge over the impact of artificial intelligence on companies' bottom lines, while precious metals again took a drubbing.
The latest development to spook markets was news that AI startup Anthropic -- which created the Claude chatbot -- had unveiled a tool that could be used by firms to carry out legal work.
Tuesday's announcement hit firms in the software, financial services and asset management industries, though analysts said there has been a general shift by investors out of tech following years of eye-watering gains, and into other industries.
An underwhelming response to earnings from titans including Alphabet, ARM and Microsoft has aided that move, which also comes as questions are raised about the wisdom of pumping hundreds of billions into AI with little idea about the timing of returns.
"The rout reflects growing unease about how quickly AI could disrupt existing business models and whether incumbent software companies can defend their margins," wrote Chris Beauchamp, chief market analyst at IG.
"Investors are pricing in the risk that new AI-native competitors could undercut pricing and erode market share across the sector."
Fiona Cincotta at City Index said: "Investors rotating into more cyclical names as fears over AI-driven disruption weighed on the market."
And she warned that "while losses in tech continue, sentiment remains fragile".
The rotation was evident in New York, where the tech-heavy Nasdaq shed 1.5 percent while the Dow Jones Industrial Average gained 0.5 percent.
The selling extended into Asia, where Seoul -- which has cruised more than 20 percent to multiple record highs this year thanks to its strong tech presence -- sank 3.9 percent.
Tokyo, Shanghai, Sydney, Wellington, Taipei, Mumbai and Bangkok were also down. Hong Kong rebounded from early steep losses to end higher, while Singapore, Manila and Jakarta also advanced.
London fell at the open, while Paris and Frankfurt rose.
"Enthusiasm towards AI has notably waned in recent months, with the market becoming increasingly bifurcated, not only amid concern over how capital expenditures will be financed (with debt-laden firms such as Oracle taking a battering), but also as concerns mount over concentration," said Pepperstone's Michael Brown.