AI Spending Fears Trigger Global Tech Rout as Investors Flee to Safety

Big Tech's Spending Binge Rattles Global Markets

Meta Platforms lost roughly $170 billion in market value in a single session after its October 21 earnings, with shares falling as much as 13% once the company raised its full-year capital spending guidance to a staggering range of $125 billion to $145 billion. That shock set off a chain reaction felt from Wall Street to Tokyo. Microsoft followed a day later, dropping about 5% despite beating on revenue and earnings, because it also pledged $190 billion in AI capital expenditure for 2026 — a 61% jump from the year before.

Alphabet had already set the tone the week prior, falling 7% on its own spending hike and dragging Amazon and Meta down with it. Three of the four most valuable AI bets on the Nasdaq have now sold off on the same complaint: the money going out the door keeps climbing faster than any proof it comes back. For investors, patience with the AI narrative is running out.

Markets From Seoul to Sydney Take the Hit

In the United States, the tech-heavy Nasdaq 100 index experienced a sharp decline of 2.9 percent, reflecting sudden investor hesitation regarding the sector's valuation limits. This downward momentum quickly crossed the Pacific, triggering substantial losses in Asian markets. South Korea's Kospi index suffered the most severe regional impact, plummeting by as much as 4 percent during trading.

Chipmaker and market heavyweight SK Hynix's US shares fell more than eight percent after it said it was scrapping plans for an initial public offering for its US subsidiary Solidigm, citing "market conditions and share price trends." MSCI's broadest index of Asia-Pacific shares excluding Japan was last flat after earlier falling as much as 0.8 percent as bargain hunting emerged following the steep selloff — but it was still set for a weekly loss of 2.4 percent, which would be a fourth straight week in the red.

Bonds and the Yen Become the World's Refuge

As tech stocks tumbled, money flowed into safe-haven US Treasuries, sending yields plunging across the curve. The benchmark 10-year Treasury yield slid more than 19 basis points — the biggest drop since March 2023. Government bonds in Asia also rallied, with the yield on 10-year Japanese government bonds falling 9 basis points to 2.780 percent, while Australia's 10-year yield dropped 8 basis points to 5.178 percent.

Safe-havens benefited broadly, with the yen rallying against the dollar, helped by strong Japanese inflation data that boosted bets on another interest rate hike. As National Australia Bank's Gavin Friend put it, "Markets are looking for safe havens as the now familiar fears over AI and the tech sector, alongside ever higher oil and energy prices are powering a move back into bonds."

What This Means for the Road Ahead

Markets also sharply pared back bets on further policy tightening from the Federal Reserve, stripping out almost a full quarter-point rate hike for next year amid concerns a bursting AI bubble could derail the data-centre investment boom and hobble the US economy. A December rate rise is no longer fully priced, with the implied probability falling to 85%.

Since AI-linked companies hit record highs in June, their equity prices have been pummelled by concerns they were overvalued, their huge outlays on infrastructure and hardware might not return a profit, and, more recently, their servicing costs were spiralling. Carol Kong at Commonwealth Bank of Australia noted that the yen could benefit further if the tech trade continued to deteriorate. The central question now hanging over markets is no longer whether AI will transform the world — it's whether the companies betting trillions on that transformation will ever see the returns to justify it.