The FTSE 100 dipped on Friday as US tech selling spilt over into Asia, weighing on sentiment in Europe.
Despite a strong set of results from Micron on Wednesday, investors appear to be taking a more measured approach to US tech this week as we start to see weakness in the ‘Mag 7’.
It’s notable to see these fabled names, such as Meta, Tesla and Google, slip away while chipmakers and AI infrastructure stocks push on.
Whether this is a short-term blip or the start of a more pronounced trend could have deep ramifications for US indices.
Investors have long cited the concentration of the Mag 7 as a risk to returns at the index level. Could we be at a stage where we start to see more dispersion of returns? This would be more than welcome after 3 years of such few stocks leading returns.
Apple being forced to hike prices due to higher chip costs is a sign of where things could be going.
While it’s tricky to know exactly how a potential realignment of US markets will play out, we do know that declines in Meta, Google, and Apple yesterday were not well-received.
“The markets have been wracked with volatility this week, and the seesaw moves just keep coming. Investors are super-wary about the fragility of the Middle East peace deal after a vessel was struck while transiting the Strait of Hormuz,” said Susannah Streeter, Chief Investment Strategist, Wealth Club.
“Fears of geopolitical fracture opening up again are colliding with a return of worries about super-high-tech valuations.
“The sell-off in tech stocks has resumed after some brief mid-week respite, with Asian indices plunging dramatically. The Nikkei slid by 5% and South Korea’s Kospi, the home of semiconductor heavyweights Samsung and SK Hynix, dived by 8%. With valuations so stretched, even a slight turn in sentiment shows up in big moves. Right now, investors are highly sensitive to worries about how long the voracious demand for chips to power the AI revolution will last.”
The FTSE 100 was dragged lower by souring sentiment, down 0.7% at the time of writing.
“The FTSE 100 took its cue from wider market weakness to trade lower on Friday morning, although it avoided the scale of losses seen for many of its global counterparts,” said AJ Bell head of financial analysis Danni Hewson.
Most FTSE 100 stocks were down at the time of writing, with Croda leading the way lower, giving up 4%. AI-related stocks such as Experian and RELX were also among the losers.
Gains for defensive stocks such as British American Tobacco, Imperial Brands and Tesco underscored the risk-off tone to markets on Friday.