Global Markets Weaken on AI Stock Sell-Off

U.S. stocks edged down on Monday as AI-related stocks, particularly those related to AI infrastructure such as Oracle, Broadcom, and CoreWeave, continued to weigh down markets due to concerns over high levels of debt to finance multibillion-dollar deals. Despite this, major indexes were not severely affected as investors rotated into other sectors like consumer discretionary and industrials. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite saw minor declines. Other news included Tesla testing driverless Robotaxis, the Pentagon partnering with Korea Zinc to build a U.S. smelter, and India's exports growing in November. Bank of America noted that changes in the EU's carbon policy could boost the automobile sector.

U.S. stocks edged down on Monday as AI-related stocks continued to weigh down markets due to concerns over high levels of debt financing multibillion-dollar deals. Oracle, Broadcom, and CoreWeave were among the affected stocks. Despite this, the broader market was not severely impacted as investors rotated into other sectors. Tesla's stock rose after CEO Elon Musk confirmed the testing of driverless Robotaxis in Austin, Texas. The U.S. has collected around $200 billion in tariffs year to date, and a Ukraine-Russia peace deal is nearly complete, according to U.S. officials.

Asian markets experienced significant losses on Tuesday, following a decline in Wall Street due to a sell-off in tech stocks, particularly those related to artificial intelligence. South Korea's Kospi led the losses, falling 2.24% to 3,999.13, its first drop below 4,000 in nearly two weeks. Other Asian markets, including Japan's Nikkei 225 and Hong Kong's Hang Seng index, also declined. The losses were attributed to a continued rotation out of AI-related stocks in the US, with shares of Oracle and Broadcom slipping over 5% and 2%, respectively. Australia's S&P/ASX 200 lost 0.29%, reversing earlier gains. The declines in Asian markets were accompanied by softer expansion in business activity in Japan and Australia, as indicated by flash composite PMI numbers.

The article discusses how the current state of the US stock market, particularly in the AI sector, is overvalued and expensive compared to historical trends. It highlights that the S&P 500 index is at a level only seen during the peak of the dotcom bubble. The article suggests that investors should be cautious and notes that AI stocks in Asia, particularly in Japan, South Korea, and Taiwan, are relatively inexpensive compared to their US counterparts.

The article discusses the global economic performance in 2025, highlighting that despite initial fears of a recession triggered by President Donald Trump's trade war, the global GDP is expected to grow by around 3% in 2025, similar to the previous year. The article also notes that unemployment remains low, and stock markets have seen respectable gains, but inflation is a concern as it remains above the 2% target set by central banks across OECD countries. The article is part of The Economist's annual ranking of economies.