SoftBank shares plunge 10% as Asian AI-linked stocks slide on valuation jitters
A woman uses her cell phone as she passes the logo of Japan’s telecommunications giant SoftBank on December 25, 2013 in Tokyo.
Toru Yamanaka | Afp | Getty Images
Shares of Asian AI-related companies and technology firms fell on Wednesday, tracking declines in their U.S. peers as investors grew wary of stretched valuations in the market’s most crowded trades.
Shares of Japan’s SoftBank, a major backer of artificial intelligence-related companies, fell 10%, while semiconductor test equipment maker cutting edge It fell over 8%, while chipmaker Renesas Electronics lost 5.48%.
South Korean memory chip giants Samsung Electronics and SK Hynix lost nearly 6%. The rise of chipmakers SK Hynix and Samsung Electronics this year has helped South Korea’s Kospi Index rise to record highs recently.
Taiwan’s TSMC, the world’s largest contract chip maker, fell 2%.
The declines came after US software company Palantir fell nearly 8% overnight despite beating expectations for the third quarter; High valuations in the AI sector have negatively impacted investor sentiment. The AI-led rally pushed the S&P 500’s P/E above 23, its highest level since 2000, according to FactSet.
The frenzy around artificial intelligence has led to growing concerns that markets may be in the midst of a tech bubble.
“The AI correction is feared, and if it happens, it will drag the rest of the market with it due to the weight of the leading names,” market veteran Louis Navellier said in a note.
Some analysts say valuations of AI companies are increasingly akin to the dot-com boom of the late 1990s, with share prices soaring far beyond credible profit expectations.
Jared Bernstein, who chaired the Council of Economic Advisers during the Joe Biden administration, noted that the share of the economy devoted to AI investment is almost a third higher than during the internet bubble period, adding that the gap between earnings potential and spending “certainly looks bubbly.”
Michael Burry, famous for predicting the 2008 financial crisis, also sparked controversy with his bet against popular names in artificial intelligence, Palantir and Nvidia. In a recent filing, Burry’s Scion Asset Management revealed significant open positions in these firms at the forefront of artificial intelligence and chip technology.
Besides Palantir, other US tech giants also fell overnight: Oracle fell 4%, Chipmaker AMD fell nearly 4%, while Nvidia and Amazon also fell.
