Technology shares declined worldwide on Friday as disappointing US earnings increased investor concerns about funding AI infrastructure. Japan's technology-heavy Nikkei 225 fell 2.5%. SoftBank, an OpenAI investor, lost 6%, taking SoftBank's decline since the June peak to 48%.
US stocks were poised to open sharply lower. Nasdaq 100 futures dropped 2.2%, while S&P 500 futures lost 1%. Neil Newman, Japan equity strategist at Tokyo-based Astris Advisory, said major technology stocks were becoming unsuitable for investment. Newman said investors would prefer to avoid companies such as SoftBank after valuations halved over a few months, rather than buy or sell.
Concerns about AI spending have increased as profitable businesses such as Google direct free cash flow toward capital expenditure and increasingly seek additional financing in public markets. Alphabet, Google's parent company, lost 13% on Thursday, erasing a record $500 billion in market value. Alphabet reported cash burn for a second consecutive quarter and disclosed that searches using "AI mode" were threatening Alphabet's core advertising business. Intel shares fell 22% in post-market trading after Intel issued a sales forecast below expectations because of a slowdown in Intel's core PC chips business.
After Thursday's losses, only three Magnificent Seven technology stocks remained higher for the year to date. Apple, Microsoft and Nvidia had gained. However, Google, Meta, Tesla and Amazon had declined. Ecaterina Bigos, senior market strategist at BNP Paribas Asset Management, said investors were increasingly questioning the pace of capital expenditure implementation as bottlenecks became more apparent.
AI chip suppliers also declined on Friday. Samsung Electronics and SK Hynix, the world's two largest memory-chip producers, fell 5.8% and 8.4%, respectively. TSMC, the world's largest contract chipmaker, lost 2.1%. Japan's Kioxia dropped 8.3%.
Fujitsu shares fell as much as 16% after investors were disappointed by second-quarter results released on Thursday. Fujitsu has sought to establish the company as an AI infrastructure provider. Tokyo Electron, which produces wafer-fabrication equipment, lost 6%.