Global Tech Sell-Off Eases as AI Funding Fears Rattle Markets, Oil Surges to $114

Global technology stocks stabilized on Friday after a sharp sell-off driven by concerns over the enormous financing requirements of artificial intelligence, while renewed geopolitical tensions pushed oil prices to a five-month high and kept investors on edge.

Asian markets provided some relief after Wall Street's losses, although European equities remained under pressure. The STOXX Europe 600 slipped 0.3%, while the retreat in technology shares prompted a broader reassessment of risk across equity, bond and currency markets.

The sell-off has exposed growing sensitivity to the cost of financing the AI boom, which has attracted enormous investments in chips, data centers and computing infrastructure. Investors are now weighing whether the anticipated returns from AI can justify the capital commitments, particularly as borrowing costs and geopolitical risks remain elevated.

Wall Street suffered its sharpest technology-led decline in months on Thursday. The Nasdaq Composite fell 2.6%, its biggest daily drop since June, while the Philadelphia Semiconductor Index plunged almost 7%. Shares in Meta Platforms dropped nearly 8%, while AI infrastructure provider CoreWeave lost 10%, taking its stock to its lowest level since May 2025. The cost of insuring CoreWeave's debt against default also surged, signaling growing concern about credit risk alongside equity valuations.

Futures suggested further caution ahead of Friday's US trading session, with Nasdaq futures down 0.1% and S&P 500 futures off 0.2%.

The immediate concern is whether the scale of spending required to build AI infrastructure will translate into sufficient and sustainable earnings. Technology companies have committed substantial resources to computing capacity, while investors must assess how quickly those investments can generate cash flows and whether demand will keep pace with the expansion of infrastructure.

A reassessment of AI profitability could affect more than chipmakers and software companies. Infrastructure providers that depend on debt financing may be particularly exposed if falling share prices coincide with higher borrowing costs or tighter access to capital.

Bond Rally Challenges Interest-Rate Expectations

The technology sell-off triggered a flight to the relative safety of government bonds, producing the biggest one-day rally in US Treasuries since March 2023. Yields fell sharply on Thursday and were back below 5% on Friday, reversing some of the pressure that had built in recent sessions.

The move also prompted investors to reconsider expectations for central bank policy. Markets have pared back bets on further interest-rate increases as concerns over AI investment and financial-market volatility have intensified.

Almost a full quarter-point Federal Reserve rate increase expected for next year has been removed from market pricing this week. The probability of a December Fed hike has also fallen, although it remained at 85%, meaning investors still viewed an increase as more likely than not.

In Europe, the implied probability of a European Central Bank rate increase in December fell to 69%, from 90% earlier in the week, according to Deutsche Bank strategist Jim Reid.

The shift underpins the tension facing central banks. Elevated energy prices threaten to push inflation higher, while falling equity markets and concerns about technology investment could weaken financial conditions and economic activity. A sustained increase in oil and gas prices would complicate any decision to ease monetary policy, even as market stress reduces expectations for further tightening.

Currency markets reflected the competing pressures. The US dollar rose 0.2% against a basket of major currencies but remained broadly unchanged for the week. The euro was heading for a moderate weekly decline, while the Japanese yen was on track for its strongest weekly advance in almost a month as investors sought safer assets.

Societe Generale's global head of currency strategy, Kit Juckes, described the market as nervous.

"The oil price is just grinding higher… and we've got an inevitable correction in tech after its huge run-up, so it's actually hard to see why dollar isn't higher," he said.

The French-German government bond spread, closely watched as a measure of financial and political risk within the euro zone, had widened to levels associated with the region's sovereign debt crisis in recent days. The relative calm in European markets on Friday offered some respite, although the underlying fiscal and political concerns remained.

Oil and Gas Add to Market Uncertainty

Energy prices continued to rise despite the easing in technology stocks. Brent crude climbed to $114 a barrel, its highest level in five months, after Houthi attacks on Saudi Arabia and reports that the United States and Israel had drawn up plans for renewed strikes against Iran following the US midterm elections.

European natural gas prices rose another 4%, leaving them almost 30% higher for October.

The energy rally creates a separate source of pressure for investors. Usually, higher oil and gas prices raise transport, manufacturing and household energy costs, complicating the inflation outlook even as financial markets begin to price out some expected rate increases.

Gold, meanwhile, failed to benefit from the demand for safety. It traded broadly flat at $4,021.99 an ounce in London after falling nearly 3% on Thursday, leaving it down 3.4% for the week. The decline indicates that investors' preference for safety has not translated into uniform gains across traditional defensive assets.

Asian markets delivered a mixed performance. Japan's Nikkei fell 0.3% on Friday and finished the week more than 4% lower. South Korea's KOSPI recovered to close higher after falling as much as 4% earlier in the session. Mainland China's CSI300 rose 1.7% after reaching its lowest level since July 2025, while Hong Kong's Hang Seng gained 0.7%, recovering some ground after Thursday's 3% decline.

Despite the volatility, Diana Mousina, deputy chief economist at AMP, said the broader equity outlook remained supported by corporate earnings growth and resilient economic data.

"It is hard to get too bearish on equities overall just yet, with earnings growth still positive and the hard economic data holding up well," she said.

"All of this means that the AI trade isn't necessarily over, but it is changing. It is no longer a case of 'buy everything'."

That assessment captures the market's emerging challenge. Investors are not abandoning artificial intelligence as a long-term growth opportunity, but are becoming more selective about valuations, financing requirements, and the companies best positioned to convert investment into profits.