A Halloween sell-off in technology stocks has intensified fears of a market crash that could hit the savings and pensions of millions of British households.
During a bruising session on Wall Street, the tech-heavy Nasdaq index fell more than 3 per cent on Friday, following a 1.4 per cent decline the previous day.
Analysts described the turmoil as “tech carnage”, with US giants Amazon and Intel among the biggest fallers after disappointing results were released on Thursday night.
Intel shares plunged almost 30 per cent, wiping about £90billion from the company’s market value, while Amazon dropped more than 3 per cent.
The latest wave of selling followed a fall of more than 12 per cent in Google owner Alphabet on Thursday night, stripping nearly £400billion from its value.
Alphabet, one of the so-called Magnificent Seven technology companies, is now down 30 per cent from its May peak. The Nasdaq has fallen 7.5 per cent, wiping £2.25trillion from its value.
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A number of US technology shares that surged to record highs this year amid enthusiasm for artificial intelligence have now entered so-called bear-market territory, meaning they have fallen more than 20 per cent from their peaks. Some have lost half their value.
The FTSE 100 has so far weathered the global technology sell-off, helped by its relatively limited exposure to technology and artificial intelligence stocks.
London’s blue-chip index edged 0.2 per cent higher to 10,744 on Friday morning, despite the sharp falls on Wall Street.
However, the technology rout is still painful for millions of British investors with exposure to US shares through their pensions and ISAs.
Many popular UK investments, including technology funds, investment trusts and funds tracking major global indices, hold significant positions in US companies whose share prices are now falling.
Neil Wilson, investor strategist at Saxo, warned of “tech carnage as October wraps up” as investors question whether massive spending on AI infrastructure, including data centres, will ultimately deliver sufficient returns.
He said: “This is starting to look quite ugly. The sell-off looks a bit indiscriminate and shows that investors don’t just want capital expenditure; they want to see the returns already.”
The artificial intelligence investment boom has faced growing turbulence as investors become increasingly concerned about the billions being spent by Big Tech to expand AI infrastructure without clear evidence of stronger profits.
Several companies have turned to bond markets to fund those projects, adding to fears that debt-financed spending will be more difficult to justify if borrowing costs remain high.
Jake Behan, head of capital markets at Direxion, said the recent share-price declines showed how much the AI investment story had changed.
He added: “The market isn’t just asking how quickly you can grow. It is asking how much you have to spend to get there.”
The AI trade received a brief boost earlier this week after Anthropic, the artificial intelligence lab behind the Claude model, announced plans to list on the US stock market at a valuation of up to £1.5trillion.
Russ Mould, investment director at AJ Bell, said: “The FTSE 100’s lack of technology exposure has proved to be a blessing in disguise. The UK index is standing tall amid a global tech sell-off.”
Dan Coatsworth, head of markets at AJ Bell, described the slump in New York as an “AI reality check”.
He said: “Investors are increasingly unhappy about the huge sums being spent on AI infrastructure without a clear roadmap showing when, or whether, those investments will generate a sufficient return. That has left investors questioning whether the money is being spent wisely.
“Big technology companies are going all-in on the belief that AI will be the biggest force in decades to transform business and consumer life. If that bet is wrong, the fallout could be enormous.”
He added: “Technology shares have gone from being investors’ main feast to stale bread.
“For years, investors viewed technology as a golden ticket to building wealth, and for a long time they were handsomely rewarded. That enthusiasm is now fading, prompting some investors to rush for the exit.
“The enormous falls in shares such as Alphabet and Intel this week suggest investor sentiment has been completely reversed. Current price movements indicate that technology investors would rather step off the treadmill than simply slow it down.”
What does the technology stock sell-off mean for your investments?
Millions of British savers have exposure to US technology companies, even if they are unaware of it.
Companies including Nvidia, Alphabet, Apple, Meta, Amazon and Intel are held by countless global funds that make up the core of many pension portfolios.
When those shares fall, the value of retirement savings and investment portfolios held by workers and pensioners can fall too.
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Dan Coatsworth, head of markets at AJ Bell, said: “The technology sell-off matters to investors around the world because the AI theme has spread across countless sectors and countries.
“In particular, the US stock market is home to the world’s biggest technology companies and makes up a substantial part of global funds held in many people’s investment portfolios.
“That means investors may have significant exposure to Big Tech without realising it.”
He noted that, 15 years ago, the US accounted for half of the MSCI World benchmark for global equities. It now represents 73 per cent.
Technology is the index’s largest sector, accounting for more than 30 per cent.
“If technology falls out of favour, global funds may not provide the diversification protection some investors expect,” Coatsworth said.
For investors who want to reduce their exposure to technology, he suggested considering a global equity fund that excludes the US.
He highlighted the iShares MSCI World ex-US ETF, which invests in companies across the world while excluding US shares.
Technology stocks make up just 10.9 per cent of the portfolio. Financial companies account for 27.9 per cent, while industrial businesses represent 17.6 per cent.
“The largest holdings include banks, healthcare companies, oil producers and mining firms,” Coatsworth said.
“That would offer greater balance across sectors and reduce reliance on technology, although it would also mean losing exposure to some of the companies that have driven the US market rally in recent years, such as Nvidia.”
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