AI Stock Fears Trigger Massive Sell-Off in Global Markets

European and North American stock markets tumbled on Friday as investor anxiety over artificial intelligence valuations persisted, capping off a volatile week in which major indexes faced their steepest declines in months—even after strong earnings from Nvidia .

Stock futures pointed lower early Friday, with contracts tied to the Nasdaq 100 down 0.9% and the S&P 500 off 0.5%. The sell-off followed a dramatic reversal Thursday: Nvidia initially surged nearly 5% after announcing record revenue but ended the session down 3.2%. The broader market mirrored this whiplash, with the Nasdaq Composite swinging from intraday gains of up to 2.5% to close nearly 2% lower.

“What strikes me is the absence of any substantial change in the narrative to trigger such an upheaval,” said Tony Roth, CIO at Wilmington Trust Investment Advisors. “There’s just not a lot of confidence in the market right now.”

The Cboe Volatility Index , Wall Street’s “fear gauge,” spiked to 26.42 on Thursday—its highest level since April—highlighting growing investor unease. The three major U.S. indexes were on track for their worst week since April, with the S&P 500 headed for a loss exceeding 2% and the Nasdaq poised to lose more than 3%.

Bubble Fears Intensify

Despite Nvidia reporting $57 billion in third-quarter revenue—a 62% year-over-year jump—and guiding for $65 billion in fourth-quarter sales, concerns about the sustainability of the AI rally deepened. Risk concentration at Nvidia became more prominent, with four customers now accounting for 61% of revenue, up from 56% the previous quarter.

“Yesterday’s moves show that investors struggling to justify AI’s sky-high valuations need not only a strong belief in the technology’s promise but also the support of lower interest rates to make the numbers work,” stated SEB Research. A later-than-expected September jobs report disappointed with unemployment rising to 4.4% even as 119,000 jobs were added, dampening hopes for a Federal Reserve rate cut in December. Market odds of a quarter-point December cut fell to just 40% on the data.

Semiconductor stocks took the biggest hit, with the PHLX Semiconductor Index plunging nearly 5% Thursday. Advanced Micro Devices dropped almost 8%, while Micron Technology lost 10.9%. Bitcoin , often seen as a risk appetite indicator, fell below $83,000—down over 30% from its October peak.

Contagion Spreads Globally

Asian markets extended the rout overnight, with major indexes in China, Japan, and South Korea closing down more than 2%. European markets opened sharply lower Friday, following the STOXX 600’s 1.8% loss on Tuesday—the benchmark’s worst daily decline since August.

The synchronized global sell-off underscores the challenge for investors: balancing massive AI infrastructure spending with uncertain returns. “Consumer spending makes up about 70% of the U.S. economy, so while the market is focused on AI and Nvidia’s results, from an economic point of view, consumer activity is a much bigger variable,” said research firm Bespoke.

Source:
Morningstar, Barron’s, Business Insider, Market Data