Global Markets Tumble on AI Investment Fears, Israeli Stocks Hit Hard

Global stock markets experienced sharp declines on Friday, led by technology and chip stocks, amid growing concerns about the immense investments required for the artificial intelligence race without guaranteed returns. The Nasdaq Composite plunged 2.9%, its steepest daily drop since June, while the S&P 500 fell 1.8% and the Dow Jones lost 1.1%.

These fears were amplified by corporate earnings reports. Amazon indicated that capital expenditures for AI infrastructure would continue to rise, while Intel issued a weak forecast and warned of cash burn. Intel's stock plummeted 28.6% on Friday, marking its worst trading day in decades. The broader chip sector was heavily impacted, with AMD down 10.9%, Nvidia losing 4.2%, and Broadcom falling 5.5%. Other major AI-related stocks like Amazon, Alphabet, Microsoft, and Meta also saw declines.

In weekly terms, the Nasdaq lost 2%, the S&P 500 dropped 0.6%, and the Dow weakened by 0.9%, though all three indices remain up for the year.

The Tel Aviv Stock Exchange also closed Friday with significant losses. The TA-35 index fell approximately 2.1%, the technology index dropped about 3.1%, and the insurance index weakened by 2.8%. Chip stocks were particularly weak, with Camtek down about 8.2% and Tower Semiconductor falling around 7.6%. Conversely, El Al gained about 2.6% and AFI Properties added about 2.3%. The local market closed before Wall Street opened and before the full extent of the U.S. declines became apparent.

Weekly trading on the Tel Aviv exchange saw broad declines across major indices. The TA-35 fell 1.58%, the TA-125 lost 2.45%, and the TA-90 index plunged 5.24%, indicating that mid-cap stocks were the hardest hit. The Israeli Shekel also weakened against the dollar, with the Bank of Israel setting the representative rate at 3.118 shekels, a 0.13% increase. The dollar further strengthened in continuous trading to around 3.1424 shekels.

Weakness in technology was also evident in European and Asian markets. The European STOXX 600 fell 0.36% on Friday, with its technology index dropping 2.75%. Despite the day's losses, the STOXX 600 completed its best month in June. Asian markets saw sharper declines, with Japan's Nikkei losing 2.12% and South Korea's Kospi down about 3.5%, with chip stocks also in focus.