By Scott Murdoch and Lucy Raitano
SYDNEY/LONDON (Reuters) -Global shares declined on Tuesday as investors grew nervous ahead of Nvidia’s earnings, critical for sentiment around soaring AI valuations, which some fear may be entering bubble territory.
Investors were also concerned about a weakening U.S. economy, with expectations for near-term U.S. Federal Reserve rate cuts continuing to recede.
U.S. S&P futures shed 0.5% while Nasdaq futures were off 0.6%. Europe’s STOXX 600 shed 1.4% taking its loss since Friday to 2.9% – its sharpest four-day drop since early April. The region’s volatility index touched its highest level in a month.
“There are plenty of excuses to take risk off the table – earnings from Nvidia tomorrow, which are huge, payrolls on Thursday, and also I think there’s a general vibe of exhaustion,” said Michael Brown, senior research strategist at Pepperstone.
Bitcoin earlier slid below $90,000 for the first time in seven months.
Analysts noted that on Monday the S&P 500 and Nasdaq closed below their 50-day moving averages for the first time since April 30.
“It’s starting to feel like investor conviction at current levels is fading,” said Tareck Horchani, head of prime brokerage dealing at Maybank Securities in Singapore.
“It’s less about a sharp catalyst and more about positioning fatigue, valuation sensitivity, and a growing sense that the rally needs a pause,” he said.
NVIDIA ANTICIPATED
Chipmaker Nvidia reports quarterly earnings on Wednesday, with investors watching for any signs of weakness in the sector.
Markets also noted news that tech billionaire Peter Thiel’s hedge fund sold its entire Nvidia stake in the third quarter.
Adding to the pressure were comments from Alphabet CEO Sundar Pichai warning that no company would remain unscathed if the AI boom collapses, as soaring valuations and heavy investment fuel concerns of a bubble.
Tech stocks in Asia were particularly hard-hit overnight, with SoftBank Group, chip-related Tokyo Electron and Advantest down between 3.7% and 7.5%.
“You’ve got waning enthusiasm around the whole AI frenzy, the narrative is increasingly one of questioning the spending as opposed to going “the more spending the better” which was the mood earlier in the summer,” said Pepperstone’s Brown.
Brown also highlighted the fact that big tech firms are increasingly tapping debt markets, with the trend leading investors to question the sustainability of big spending plans.
Amazon is set to raise $15 billion from its first U.S. dollar bond offering in three years, according to a filing with the Securities and Exchange Commission on Monday.
On Tuesday Bank of America’s monthly fund manager survey found a record share of investors think companies are “overinvesting”, a sign spending by hyperscalers may need to slow down.
JGBs SLIDE
“Typically when these risk-off events happen it’s initiated by the Fed and it gets extended on worries in Japan,” said Manish Kabra, lead U.S. equities and multi-asset strategist at Societe Generale, who noted that Japanese stocks sold off the hardest.
Japanese government bonds also slumped on worries about Prime Minister Sanae Takaichi’s ballooning spending plans.
Bank of Japan Governor Kazuo Ueda said on Tuesday he told PM Takaichi that the central bank was gradually raising interest rates to guide inflation smoothly towards its 2% target, in remarks that keep markets guessing on timing of hikes.
Ueda has signalled the chance of an interest rate hike as soon as next month. But Takaichi and her finance minister, Satsuki Katayama, have made clear their preference for rates to remain low until inflation durably meets the BOJ’s 2% target.
“My expectation is that another rate hike will be pushed into 2026. By the first quarter, the BOJ can wait for the outcome of more wage negotiations and it is a conservative organisation and they could continue to wait and see,” said Tai Hui, JPMorgan Asset Management’s chief market strategist for Asia.
Elsewhere, gold was down 0.2% to $4,036 an ounce while Brent crude futures slipped 0.4% to $63.92 a barrel.
Bitcoin was off 0.6% at $91,288.06 and down about 30% from its peak.
The dollar rose to a more than nine-month high against the yen before easing, while edging down versus the euro.
(Editing by Christian Schmollinger and Louise Heavens)
