Wall Street follows global markets lower as traders sell to lock in profits after recent AI rallies

AI stocks broadly have been under intermittent pressure recently because of worries that their profits can’t possibly keep pace with the tremendous rallies for their stock prices.

In premarket trading Friday, Micron fell 5%, Intel was down 3.6% and Broadcom and Qualcomm both retreated close to 2%.

The growing likelihood of interest rate hikes later this year because of rising inflation has helped deflate the massive run-up in AI-related stocks in recent days as traders worry that the higher rates could hamper economic growth.

It was a similar story in Asia, where technology stocks also have seen wild swings recently.

Tokyo’s Nikkei 225 index shed 4.2% to 69,360.88 and the Kospi in Seoul plunged 5.8% to 8,411.21. Both recovered some ground lost earlier in the day.

The wide swings in Tokyo and Seoul are typical of recent volatility in markets as investors react to the deluge of dollars heading into AI data centers and other investments. Shares in Japan and South Korea hit records this week and logged strong gains on Thursday after chipmakers Qualcomm and Micron Technology reported better than expected earnings.

In South Korea, market trends have been dominated by movements in stock in Samsung Electronics, the country’s biggest company, and chipmaker SK Hynix, which like Samsung is collaborating with Nvidia on artificial intelligence.

Given that concentration, “a strong Micron print can produce a powerful upside chase one day; a new concern around memory costs, capex, or the durability of AI demand can reverse it violently the next,” Stephen Innes of SPI Asset Management said in a commentary.

Samsung’s shares lost 5.3% on Friday, while those of SK Hynix fell 8.4%. In Tokyo trading, technology giant SoftBank Group Corp. lost 12.5% and computer chip testing equipment maker Advantest sank 3.2%.

Hong Kong’s Hang Seng lost 1.8% to 22,667.13, while the Shanghai Composite index slipped 2.3% to 4,027.26.

In Australia, the S&P/ASX 200 was an outlier, gaining 0.2% to 8,764.20.

Taiwan’s Taiex gave up 3.6%.

While the AI boom regularly roils tech shares, other sectors have held relatively steady, noted Thomas Mathews of Capital Economics.

“Even if the AI boom turned into a bust the ‘non-tech’ parts of the stock market could conceivably shrug it off for a while, as they have this week,” he wrote in a report.

Elsewhere, at midday in Europe, Germany's DAX gave up 1.3%, while the CAC 40 in Paris lost 0.8%. Britain's FTSE 100 shed 0.9%.

Oil prices drifted even closer to their levels leading up to the U.S. and Israel's war with Iran.

The price for a barrel of Brent crude oil, the international standard, declined $1.85 to $73.65 early Friday. It has fallen from its highs above $100 caused by the closure of the Strait of Hormuz, which slowed the global flow of oil.

U.S. benchmark crude oil lost $1.62 to $70.30 a barrel. It was around $67 a barrel in the days leading up to the war in late February.