Europe midday: Losses extend as investors flee AI stocks

(Sharecast News) - European stockmarkets were a sea of red on Friday after tech stocks were battered on Wall Street and Asia overnight amid fears of a slowdown in the much-hyped artificial intelligence spending boom.

The pan-regional Stoxx 600 index plunged 1.76% to 643 at 1219 GMT. All major bourses declined, with Germany declining 2.44%, France 1.76%, the UK 2.21%, Italy 1.23% and Spain 1.25%.

Sentiment was hit by concerns that the Democrats stronger-than-expected US midterm election showing could curb the AI-led investment boom. The uncertainty sparked a sharp Wall Street sell-off, wiping more than $3.2tn from US equity valuations.

The weakness spread into Asia-Pacific trading, where markets moved sharply lower as investors continued to rotate out of technology stocks amid fears that enthusiasm for AI-related investments may be cooling. Investor concerns about whether the level of cash being thrown at the sector was actually justified finally came to a head.

"The relief rally which followed the midterm elections was soon obliterated as the possible ramifications became clear, sparking a brutal sell off across technology shares which spread across most other sectors and indeed global markets," said Interactive Investor head of markets Richard Hunter.

"The Democrats' new found power following the election success followed a campaign largely predicated on the populist AI backlash. Most notably, data centre development came under fire which, if implemented, could put the brakes on the AI surge, not least through reduced chip demand."

"This latest jolt followed what had already been a jittery space, with concerns over whether the returns on the huge AI spend could or would be sufficiently met."

In equity news, chipmakers and related industries, perceived as under threat from AI, all rallied. BE Semiconductor, ASML, Soitec and Aixtron were all gainers, while Teleperformance tanked as the French AI firm suffered a double whammy from the global backlash and revealing on Thursday that it would deliver lower revenues this year.

IAG fell as the British Airways owner reported a lower third-quarter profit on Thursday as a sharp rise in fuel costs and operational disruption offset strong revenue growth across its transatlantic business, although the airline group increased its dividend and pressed ahead with its share buyback programme.

Coca-Cola HBC gained as the drinks bottler said it had received no notification from the Russian government of any changes to its operations in that country, which have been operated locally on a self-standing basis since 2022.

Reporting by Frank Prenesti for Sharecast.com