Tech slide continues as Alphabet poised to double AI spending

Stocks on Wall Street extended their slide for a third day as Google-parent Alphabet’s plans to roughly double its spending on artificial intelligence infrastructure and a soft outlook from semiconductor firm Qualcomm kept the mood on tech companies subdued.

Bitcoin slumped below US$70,000, giving back all of its gains since Donald Trump won the US presidency in November, with crypto treasury firm Strategy due to report its quarterly earnings after trading closes, along with Magnificent 7 alumni Amazon.

Stock markets were weaker across the Atlantic, where the Bank of England and European Central Bank both kept their key rates unchanged, although the UK’s monetary authority’s decision makers almost voted to cut.

And with New Zealand’s market closed for the Waitangi Day public holiday, Australian futures are pointing to a soft day across the Tasman, with Rio Tinto in focus after the miner again pulled the pin on merger talks with Glencore.

Going down

The S&P 500 and Dow Jones Industrial Average were both down 0.7% in late trading as investors remained uneasy about the tech sector after Anthropic’s foray into legal uses for its Coworker tool prompted a rethink as to how broadly the disruption of the new technologies will go. The tech-heavy Nasdaq Composite dropped 0.8%, hitting a two-month low.

Google-parent Alphabet declined 2.5% as investors looked past the strong revenue growth to the firm’s plans to double its spending on AI infrastructure, while Qualcomm tumbled 7.6% on a soft outlook for the coming year, which the semiconductor company put down to the industry-wide shortage of memory supply and price increases.

Amazon is due to report after the bell, in the latest of the Magnificent 7 earnings announcements.

Bitcoin sank 9.9% to US$66,698 at 7am in Auckland with the cryptocurrency giving up all the gains it made since Donald Trump was returned to the White House, with promises of a crypto-friendly policy environment. Bitcoin treasury firm Strategy is due report after trading closes.

The Cboe’s volatility index, known as Wall Street’s fear gauge, jumped 6.8% to 19.91, with unexpectedly weak job openings data for December adding to the downbeat mood, and US government bonds rallied as the yield on 10-year US treasuries fell 6 basis points to 4.21%. Silver futures sank 9.4% to US$76.47 an ounce, while gold futures were down 1% at US$4,901 an ounce.

The kiwi dollar traded at 59.85 US cents at 7am in Auckland from 59.84 cents.

Even Europe

Across the Atlantic, stock markets were weaker with the UK’s FTSE falling 0.9%, led by Glencore after merger talks with Anglo-Australian miner Rio Tinto were pulled, while Germany’s DAX 30 declined 0.5% and France’s CAC 40 slipped 0.3%.

Banking stocks were broadly weaker on the continent after the European Central Bank and Bank of England both kept their benchmark interest rates unchanged, although the UK central bank’s voting committee was one vote away from a cut.

Meanwhile, the British pound tumbled as pressure mounts on the UK government over ties between convicted sex offender Jeffrey Epstein and former British ambassador to the US, Peter Mandelson. The kiwi rose to 44.17 British pence from 43.92 pence yesterday.

New Zealand’s market is closed for the Waitangi Day public holiday, with the S&P/NZX 50 index nudging up 0.2% in the shortened trading week, with local investors turning their mind to the upcoming domestic earnings season.

Meanwhile, Australian futures are pointing to a 1% decline for the resources-heavy S&P/ASX 200 index when trading opens across the Tasman. Rio Tinto’s London-listed shares were fell 2.6% after the merger talks with Glencore fell through.

Dual-listed Manuka Resources sank 18% to 15.5 Australian cents on the ASX yesterday and 2.2% to 22 NZ cents on the NZX. The parent of Trans-Tasman Resources said after trading closed that its ironsands project off the Taranaki Bight was declined in a draft decision by the consenting panel considering the application, and has until Feb 19 to comment.

Reporting by Paul McBeth. Image from Adarsh Chauhan on Unsplash.