San Francisco Frontiers - Stocks struggle to bounce back from AI angst-fueled rout

Recent days have seen heavy selling of AI-related stocks, with investors shifting money to other sectors and into bonds.

Reassuring comments from Nvidia chief Jensen Huang on the financial health of CoreWeave, an AI data center firm, sought to draw investors back into tech stocks ahead of the weekend.

That helped boost sentiment in Asia, where the Seoul and Tokyo indices led gains thanks to strong bounces by the chipmakers SK hynix and Kioxia.

The positive sentiment continued on European stock markets, but fizzled as Wall Street opened.

"There's little love for tech stocks right now, investors are dumping them at a rather undignified pace," said IG analyst Chris Beauchamp.

"A recovery last night provided only brief respite, as the selling resumed in the US session," he added.

AI weakness became more pronounced as the session proceeded in New York. So-called "neocloud" companies CoreWeave and Nebius both sank about 12 percent.

"We're clearly seeing some areas of stress in this very unique part of the AI market," said Arun Sundaram of CFRA Research.

Markets had been spooked by concerns about CoreWeave's huge debt pile. Yields on CoreWeave bonds have soared this week, reflecting worries over its future.

The weakness in these stocks "is really driven by financing risk" and the chance that interest rates will rise, which affects their interest payments, according to Sundaram.

All three major US indices fell Friday, with the S&P 500 losing 1.1 percent and the Dow down 0.3 percent.

US stocks also lost ground as oil prices rose, with both major crude contracts finishing up more than three percent.

- 'Bumpy' AI path -

At the IMF and World Bank meetings in Bangkok, Federal Reserve Chair Kevin Warsh said AI was the "most consequential change" to the global economy in his lifetime.

He said the investment boom would drive prices up in the short term, but "there really is, I think, a huge benefit to the global economy, to the US economy over the horizon."

Nonetheless, "the path from where we are to there is likely to be a very bumpy one, bumpy in our understanding of the technology, bumpy because we really don't know what the market structure is going to be of these new technologies," he said.

Elsewhere, the Jakarta stock market tanked more than 11 percent, its heaviest loss since 1998, after index compiler MSCI said transparency concerns meant it was "no longer appropriate" to maintain Indonesia's emerging-market status.

A downgrade to "standalone" status could see an exodus of foreign investment in the Indonesian market.

- Key figures at around 2030 GMT -

New York - Dow: DOWN 0.3 percent at 52,002.41 (close)

New York - S&P 500: DOWN 1.1 percent at 7,659.44 (close)

New York - Nasdaq: DOWN 2.1 percent at 26,140.03 (close)

London - FTSE 100: UP 0.4 percent at 10,881.90

Paris - CAC 40: UP 0.3 percent at 7,956.70

Frankfurt - DAX: UP 1.0 percent at 25,622.61

Tokyo - Nikkei 225: UP 1.4 percent to 65,324.29 (close)

Seoul - Kospi: UP 2.1 percent to 5,668.05 (close)

Hong Kong - Hang Seng Index: UP 0.5 percent to 24,186.83 (close)

Shanghai - Composite: UP 0.2 percent to 3,716.28 (close)

Brent North Sea crude: UP 3.7 percent at $109.86 per barrel

West Texas Intermediate: UP 3.5 percent at $101.41 per barrel

Euro/dollar: UP at $1.1236 from $1.1220 on Thursday

Pound/dollar: UP at $1.3329 from $1.3275

Dollar/yen: DOWN at 157.99 yen from 158.00 yen

Euro/pound: DOWN at 84.31 pence from 84.52 pence

I.Sanders--SFF