Investors are retreating from crowded AI trades, sending the yen higher and driving steep falls in US technology shares as concerns mount over escalating infrastructure costs and uncertain returns.
Risk aversion swept through markets on Thursday as investors cooled on artificial intelligence-linked trades, sending the yen higher, hammering US technology shares and reviving debate about whether the recent rally in megacap stocks had gone too far. The Japanese currency strengthened against the dollar, euro and pound, a move analysts linked to a broader shift into safer assets as doubts grew over the scale and durability of AI-related investment. Japan’s September consumer prices also accelerated beyond the Bank of Japan’s 2% inflation target, reinforcing expectations that policymakers could keep a tighter stance for longer.
US equities responded sharply to the same concerns. According to AP, the S&P 500 fell 1.2% and the Nasdaq Composite sank 2.6% on 22 October, with technology stocks bearing the brunt of the sell-off even as the Dow Jones Industrial Average edged higher and the Russell 2000 was little changed. That split underscored how concentrated the market’s recent gains had become in the AI trade, and how quickly sentiment can turn when investors start to question whether the spending boom will translate into profits.
Meta Platforms was among the names hit hardest, sliding about 7% after its latest results raised fresh questions about the cost of building out AI infrastructure. Axios reported that the company lifted the lower end of its 2026 capital spending guidance and declined to give a 2027 forecast, deepening concern that the largest technology firms may need to keep pouring billions into data centres and chips before seeing a clear return. Advanced Micro Devices fell more than 8%, while Micron Technology and Nvidia also lost ground as traders reassessed the payoff from the AI boom.
The pullback was not confined to equities. Oil prices moved higher on renewed supply concerns, including worries over disruption in the Middle East, while gold struggled to benefit from the risk-off mood. The shift in the dollar-yen pair was especially notable, because it suggested investors were unwinding carry trades, in which money is borrowed in low-yielding currencies such as the yen and invested elsewhere for higher returns. If those positions continue to be closed, the yen could retain support even if market volatility eases.
For now, traders will turn to a packed calendar of economic releases for clues on the next leg of the move. Later in the day, Canada releases August retail sales, while the United States publishes preliminary October purchasing managers’ index readings from S&P Global and the University of Michigan’s consumer sentiment survey. On Monday, attention shifts to Germany’s Ifo business climate data and the UK’s CBI distributive trades survey, both for October, as investors look for signs that the global economy can withstand tighter financial conditions and a wobblier AI trade.
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