The Japan Times - Stocks mostly drop as tech rally fades

A flood of multibillion-dollar investment into artificial intelligence has been a key driver of the surge in mostly technology equities across the globe this year, sending valuations to record highs.

But there is increasing speculation that tech-led gains may have gone too far and a painful correction could be on the way.

"Wall Street CEOs have also put investors on notice for a correction in the next 1-2 years," said Kathleen Brooks, research director at trading group XTB.

"It seems like the investment community has taken heed of this message," she added.

Shares of Palantir slumped 8.0 percent despite the company reporting a 63 percent surge in revenues to $1.2 billion, enabling profits of more than three times the year-ago level.

"We have very high expectations with respect to what the future has in store for AI stocks," said Adam Sarhan of 50 Park Investments.

"The second big concern is the fact that there's lack of (momentum) in other areas in the market" besides AI, he said.

US chipmaker Nvidia and Deutsche Telekom, meanwhile, said a one-billion-euro ($1.1 billion) industrial artificial intelligence hub would soon be launched in Germany, Europe's latest bid to catch up in the global AI race.

This came a day after ChatGPT-maker OpenAI signed a $38 billion deal with Amazon's AWS cloud computing arm.

Wall Street's main indices retreated on Tuesday, with the tech-heavy Nasdaq Composite finishing down more than two percent.

In Europe, the Paris and Frankfurt stock markets ended lower.

The British pound retreated against the dollar after finance minister Rachel Reeves hinted at tax rises in a pre-budget speech.

That helped London's FTSE 100 index that includes many multinationals whose earnings are inflated by a weak pound, and which finished the day slightly higher.

The weakness in North America and Europe tracked a lackluster day in Asia, with Tokyo, Hong Kong and Shanghai stocks falling.

Cautious remarks from US Federal Reserve officials did little to provide support for further buying after the central bank's chief, Jerome Powell, indicated last week that a third rate cut this year was not definite.

Data on Monday indicated some further weakness in the US economy, with a key gauge of activity in the manufacturing sector contracting more than expected and for an eighth straight month in October as demand and output weakened.

In company news, shares in British energy giant BP were flat after a drop in oil prices on Tuesday overshadowed its strong earnings report.

Crude prices shed over half a percent as the market anticipated oversupply.

"The oil price slid amid ongoing concerns about oversupply despite OPEC+'s decision to pause output increases early next year," said analyst Axel Rudolph at IG trading platform.

Shares of biotech company Metsera soared more than 20 percent after it disclosed that it received a fresh takeover bid from Novo Nordisk of about $10 billion that topped a raised bid from Pfizer to about $8.1 billion. Pfizer shed 1.4 percent.

- Key figures at around 2120 GMT -

New York - Dow: DOWN 0.5 percent at 47,085.24 (close)

New York - S&P 500: DOWN 1.2 percent at 6,771.55 (close)

New York - Nasdaq Composite: DOWN 2.0 percent at 23,348.64 (close)

London - FTSE 100: UP 0.1 percent at 9,714.96 (close)

Paris - CAC 40: DOWN 0.5 percent at 8,067.53 (close)

Frankfurt - DAX: DOWN 0.8 percent at 23,949.11 (close)

Tokyo - Nikkei 225: DOWN 1.7 percent at 51,497.20 (close)

Hong Kong - Hang Seng Index: DOWN 0.8 percent at 25,952.40 (close)

Shanghai - Composite: DOWN 0.4 percent at 3,960.19 (close)

Euro/dollar: DOWN at $1.1479 from $1.1520 on Monday

Pound/dollar: DOWN at $1.3019 from $1.3140

Dollar/yen: DOWN at 153.66 yen from 154.22 yen

Euro/pound: UP at 88.17 pence from 87.66 pence

West Texas Intermediate: DOWN 0.8 percent at $60.56 per barrel

Brent North Sea Crude: DOWN 0.7 percent at $64.44 per barrel

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T.Ueda--JT