Global Markets Reel as AI Bubble Concerns Intensify
Financial markets worldwide are experiencing significant turbulence as fears grow that the artificial intelligence boom has transformed into a speculative bubble ready to burst. The anxiety has triggered sharp declines across global stock exchanges and wiped out bitcoin's gains for the year, creating what analysts describe as a necessary market correction.
Tech Stocks Lead the Retreat
The sell-off began on Wall Street, where the technology-heavy Nasdaq composite index closed below a key technical indicator on Monday for the first time since late April. This development marks a notable shift in sentiment after months of record-breaking performances.
According to financial experts, investors are growing increasingly concerned about high valuations in the AI sector and the massive investment spending required, which could delay returns for shareholders. The market is now closely watching Wednesday's financial results from Nvidia, considered the beating heart of Wall Street's AI boom.
Victoria Scholar, head of investment at Interactive Investor, explained: "There's a general sense of nervousness that has captured the market mood lately. Fears of an AI bubble and concerns about the market's heavy dependence on a handful of tech giants have caused investors to dial back their exposure to speculative assets."
Global Market Impact
The ripple effects from Wall Street spread rapidly across international markets:
- Japan's Nikkei 225 index fell more than 3%
- Hong Kong's Hang Seng dropped 1.7%
- Britain's FTSE 100 declined by just over 1%
- Germany's DAX and France's CAC lost 1.2% and 1.3% respectively
Meanwhile, bitcoin experienced a dramatic reversal from its recent highs. The cryptocurrency, which reached a spot rate of $125,000 just last month, has fallen to approximately $91,000 - below its starting point of around $94,000 at the beginning of 2025.
Analysts See Healthy Correction
Many financial professionals view the market movements as a necessary adjustment rather than a cause for panic. Mike Gallagher, director of research at Continuum Economics, told Sky's US partner CNBC that the current action suggests equities could fall about 5% from recent highs, or potentially "a bit more."
Gallagher noted: "There's some things coming over the horizon that make you want to take a bit of risk off the table. Part of it is just natural profit-taking, part of it is thinking, 'well, is the macro story going to be perfect? No, it's not.'"
He added that for a major sell-off to occur, significant bad news would be required, and markets haven't reached that point yet. The current uncertainty includes potential US court rulings against Donald Trump's reciprocal tariffs regime and reduced expectations for further interest rate cuts by the US central bank.
Baskets of top AI-linked stocks have now entered what market technicians call correction territory, having fallen more than 10% in rapid succession this month. While futures indicated more pressure ahead for US trading, analysts expected any additional declines to be limited in scope.
