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US technology stocks and bitcoin rallied strongly on Friday after three days of heavy selling fuelled by investor concerns over companies’ vast AI investments.
The tech-heavy Nasdaq Composite index recovered 2.2 per cent on Friday, cutting its loss for the week to 1.8 per cent.
Chipmaking giant Nvidia led the rebound with a 7.8 per cent surge, with Broadcom and Intel also jumping.
Bitcoin also bounced back after falling to the lowest level since 2024 in the previous session. It was recently trading higher by 12 per cent to $70,367. Michael Saylor’s bitcoin-hoarding company Strategy surged 24.4 per cent.
Amazon was an outlier, with its shares falling 5.6 per cent on Friday after saying its capital expenditure would hit $200bn this year, but the broader market recovered part of the week’s heavy losses.
Friday’s gains were relatively broad and extended beyond tech. The Russell 2000, which comprises economically sensitive small-cap stocks, leapt 3.7 per cent. Wall Street’s benchmark S&P 500 index rose 2 per cent and the Dow Jones Industrial Average added 2.5 per cent to cross the 50,000 level for the first time.
The sell-off earlier this week was prompted by investors’ nerves about the vast scale of tech giants’ investment in AI, and fears that the technology will disrupt the business models of capital-light stocks, such as data analytics, publishers and software providers.
“The market is rethinking its approach to AI,” said Fabiana Fedeli, chief investment officer for equities at M&G, adding that investors are now “a lot more selective in which companies [they] will decide to bet on”.
But Arun Sai at Pictet Asset Management noted that “the pullback of the AI ecosystem vs the broader market is tactically stretched. So some dip buying is emerging as valuations seem more playable to some investors”.
Amazon, Google, Meta and Microsoft have unveiled plans to spend a combined $660bn on AI build-out this year, a 60 per cent rise from their 2025 spending.
The numbers prompted a new wave of investor scrutiny about when the vast spending is likely to generate a return.
“We are worried in places where we see huge increases in spending but we cannot see what the pay-off is going to be,” said Michiel Plakman, head of global equity at asset manager Robeco.
“You have to sit through it, name by name, to see if they’re in the right camp and doing the right things,” he said.
The release of new software by AI group Anthropic has fuelled a heavy sell-off in software stocks perceived to be under threat from the technology.
Anthropic last week launched a series of open-source plug-ins for its AI coding tool, Claude Code, which are tailored to specific corporate uses, such as automating legal contract reviews.
Private credit groups, including Ares and Blue Owl, which have been big lenders to the software companies, have also been hit in the sell-off.
But software stocks rebounded on Friday as some investors said the rout had gone too far. Caroline Shaw, multi-asset portfolio manager at Fidelity International, said “mission-critical” corporate software was unlikely to be quickly supplanted by AI. “The investment case is not broken so this is more of a buying opportunity,” she said.
Additional reporting by Rachel Rees in London
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