Global stocks fell on Thursday as renewed concerns about the financial returns on artificial intelligence investments overshadowed strong technology earnings, while escalating tensions in the Gulf pushed oil prices toward a five-month high and heightened fears of a broader economic shock.
MSCI’s All-Country World Index fell 0.4%, putting it on track for its biggest daily decline in two weeks, as technology shares tumbled across Asia and Europe. The retreat suggested that better-than-expected corporate results were no longer sufficient to sustain investor confidence amid mounting questions about the cost of the AI boom and the ability of companies to generate adequate returns on their investments.
The European STOXX 600 dropped 1%, dragged lower by technology-related stocks including ASML, Schneider Electric and Siemens Energy. US stock futures fell between 1% and 2%, signaling a weaker opening on Wall Street.
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Ben Laidler, head of macro and equity strategy at Bradesco BBI, said investors were struggling to settle on a clear direction amid competing economic, corporate and geopolitical developments.
“There are lots of cross currents in markets at the moment, which are grappling for a narrative right now,” Laidler said.
“The big concern is that AI-driven earnings narrative, which has supported US earnings and spread to global equities, may be challenged here.”
The concerns emerged even after Meta Platforms reported third-quarter revenue above analysts’ expectations late on Wednesday. The company’s results initially offered support to the technology sector, but optimism faded after it outlined plans to issue non-voting stock, reviving questions about its capital requirements and the financing of its AI ambitions.
Meta shares fell about 0.8% in premarket trading, while Tesla dropped nearly 5% after reporting earnings and cutting its spending forecast ahead of a possible merger with SpaceX.
Meta also faced a separate legal setback after a New Mexico judge ordered it to pay a $25 billion penalty in a data privacy case. The ruling added another source of uncertainty for the social media company, although its final financial liability will depend on the outcome of the legal process.
The market reaction exposes a growing divide between AI companies’ ability to generate revenue and investors’ willingness to finance the infrastructure required to sustain future growth. Strong results can demonstrate current demand, but they do not necessarily resolve concerns over capital expenditure, financing costs or the commercial returns on increasingly expensive computing capacity.
The latest selloff comes as investors scrutinize the scale of spending by technology companies seeking to expand their AI capabilities. Data centers, advanced processors, networking equipment and electricity infrastructure require substantial upfront investment, creating pressure on companies to demonstrate that anticipated demand will translate into durable earnings and cash flow.
Meta’s results offered evidence of continued business growth, but its financing plans highlighted the extent to which AI expansion may require additional capital. The prospect of issuing non-voting stock raised fresh questions about how the company intends to fund its commitments and how the costs of that expansion will ultimately be distributed among investors.
Tesla’s share-price decline added to the pressure on technology-related stocks. Its spending forecast reduction came alongside discussions about a possible combination with SpaceX, introducing further uncertainty about the future structure and capital allocation of Elon Musk’s businesses.
The declines extended beyond US technology companies. European shares linked to semiconductor manufacturing and industrial electrification also came under pressure, indicating that concerns about AI investment were affecting companies throughout the infrastructure supply chain.
That broad exposure makes the market’s reassessment notable. The AI investment narrative has supported not only chipmakers and software developers but also equipment suppliers, energy-related businesses and companies building the infrastructure needed to power computing systems. If investors become less confident about the returns on that spending, the effects can spread across several sectors and markets.
However, the selloff does not establish that AI demand is weakening or that the investments will fail to generate returns. It shows that investors are becoming more sensitive to the cost of expansion and the time required for those investments to produce sufficient cash flow.
Oil Surge Revives Inflation and Growth Concerns
Geopolitical tensions provided another source of pressure as oil prices climbed on concerns about possible supply disruptions in the Middle East.
Brent crude rose 3% to $112 a barrel, approaching a five-month high after further Houthi attacks in Saudi Arabia increased fears of a wider conflict. The developments raised concerns that disruptions could threaten regional energy infrastructure and shipping routes.
Higher oil prices pose a difficult challenge for central banks and investors. They can increase transport, manufacturing and electricity costs, placing upward pressure on inflation while reducing households’ purchasing power and raising expenses for businesses.
The combination of expensive energy and uncertainty over AI investment also complicates the outlook for economic growth. If oil prices remain elevated, companies may face higher operating costs at the same time that investors demand stronger evidence of profitability from major technology investments.
Yet the response in bond markets suggested that concern about economic damage was outweighing fears of a sustained inflationary acceleration during Thursday’s trading.
US government bonds attracted demand, pushing Treasury yields lower by their largest amount in a week. The 10-year Treasury yield fell seven basis points to 5.075%, dropping below the French 10-year government bond yield for the first time in 13 years.
The move indicates that investors were seeking the relative safety of government debt despite the inflationary risks associated with higher oil prices. It also suggests that markets were weighing the possibility that geopolitical disruption and financial-market volatility could weaken economic activity.
French government bonds, meanwhile, have faced a different set of pressures. Yields rose above 5% this month for the first time since 2002 as investors questioned the government’s ability to contain social unrest and bring public spending under control.
Yen Strengthens As Gold and Cryptocurrencies Retreat
Currency markets reflected a mix of safe-haven demand and changing expectations for monetary policy.
The yen strengthened, with the dollar falling 0.7% to 157.1 yen after Bank of Japan Deputy Governor Ryozo Himino signaled readiness to raise borrowing costs. His comments reinforced expectations that Japanese monetary policy could become less accommodative, supporting the currency.
The euro was broadly steady at $1.1241 after losing 0.8% over the month. The dollar index, which measures the US currency against a basket of six major currencies, slipped 0.1%.
South Korea’s won was little changed at 1,324 per dollar after the Bank of Korea left its benchmark interest rate unchanged at 3.00% on Thursday.
Gold, which can attract demand during periods of uncertainty, failed to benefit from the broader risk aversion. Prices fell 1.2% to $4,090 an ounce, while bitcoin and ether each lost about 3%, trading at approximately $82,000 and $2,412, respectively.
The divergence suggests that investors were not moving uniformly into traditional and digital assets perceived as alternative stores of value. Currency movements were also influenced by interest-rate expectations, while gold and cryptocurrencies faced their own market-specific pressures.
Thursday’s developments left global markets confronting several risks at once: uncertainty over AI spending returns, rising energy costs and geopolitical tensions, alongside divergent fiscal and monetary conditions across major economies.