Global markets retreat as tech mood sours, oil prices jump

Global stock markets experienced a downturn on Thursday as technology companies faced renewed struggles following a mixed set of earnings reports from major U.S. firms. Additionally, rising oil prices contributed to the negative sentiment among investors.

Companies associated with artificial intelligence have seen a volatile market trajectory since reaching peak values in June. Concerns over substantial investment amounts and the timeline for achieving profitability, compounded by increasing debt servicing costs, have intensified uncertainty in this sector.

On Wednesday, SpaceX, led by Elon Musk, released a strong quarterly report, its second since going public in June. This announcement had initially buoyed investor confidence, resulting in gains for all three primary U.S. stock indices. However, the situation became more complex with mixed after-hours earnings from tech giants Meta and Tesla, causing investors to reassess their positions.

Susannah Streeter, chief investment strategist at Wealth Club, remarked, “Risk-off sentiment is returning amid high geopolitical tensions and a swirl of worries about financing the AI juggernaut.”

The rise in oil prices further pressured the markets, with Brent crude oil futures climbing four percent to reach $113.17 per barrel. This increase followed threats from Iran's Revolutionary Guards to target American military bases in the Middle East if the U.S. continues to escort vessels through the strategically important Strait of Hormuz.

While many major AI firms have yet to report their earnings, the market reacted unfavorably to the results released late Wednesday. Tesla, the electric vehicle manufacturer, reported a decline in profits for the July-September quarter and reduced its capital expenditure forecasts for the year. In contrast, Meta, the parent company of Facebook, increased its projections for spending on artificial intelligence.

As a result, Tesla shares fell by 3.1 percent in New York, while Meta's stock dropped by 7.0 percent. The primary indices on Wall Street reflected this downward trend, with the tech-heavy Nasdaq Composite index decreasing by 2.6 percent.

Analyst Patrick O'Hare from Briefing.com pointed to Meta's increased spending plans as a key factor in the market's decline, alongside a cautious outlook from Lam Research, which highlighted supply chain issues as a significant concern. O'Hare noted that these factors suggest companies may not achieve the growth that their stock prices have implied, indicating a shift in investor sentiment toward safer investments such as U.S. Treasuries.

“Investors are seeking some safety under the theory that perhaps this AI trade could get unruly,” he added.

Looking ahead, major tech companies including Microsoft, Amazon, and Alphabet are scheduled to report their earnings next week, with Apple and Nvidia set to follow in November. Meanwhile, Asian technology stocks also faced a decline on Thursday, with South Korean semiconductor manufacturers SK hynix and Samsung seeing their shares drop by 5.5 percent and 4 percent, respectively, contributing to the broader market's downturn.