Market Rout Hits London as AI Fears Intensify
London's premier FTSE 100 index experienced significant declines on Tuesday morning, swept up in a global wave of investor anxiety triggered by stark warnings about the sustainability of the artificial intelligence boom. The blue-chip index fell over one percent as markets opened before stabilising at a 0.9 percent loss, closing at 9,591.40.
This dramatic downturn comes just days after the City of London anticipated the index would break the psychologically significant 10,000-point barrier, following a week of consecutive record highs. The sudden reversal highlights how quickly flaring investor jitters can spark widespread sell-offs.
Global Domino Effect in Markets
The sell-off was far from isolated to London. Europe found itself awash in red on Tuesday, with Germany's DAX down over one percent, Paris's Cac 40 falling 1.2 percent, and Amsterdam's AEX declining by 1.3 percent.
This followed substantial losses on Wall Street during Monday's trading session, where the Dow Jones dropped 1.2 percent, while the S&P 500 and tech-heavy Nasdaq recorded respective 0.9 and 0.8 percent declines.
Pichai's Sobering AI Reality Check
The renewed market fears were significantly amplified by comments from Sundar Pichai, Chief Executive Officer of Alphabet, Google's parent company. In an interview with the BBC, Pichai delivered a sobering assessment, stating that "no company is going to be immune, including us" if the burgeoning AI bubble were to burst.
Drawing a parallel to the early days of the internet, Pichai acknowledged periods of "excess investment" but emphasised the technology's profound long-term impact. "I expect AI to be the same," he remarked. "So I think it's both rational and there are elements of irrationality through a moment like this."
Sector-Specific Impacts and Analyst Views
Within the FTSE 100, mining giants bore the brunt of the selling pressure. Fresnillo led the fallers with a five percent drop, closely followed by Anglo American, which fell four percent. This coincided with the price of gold falling to $4,042.38 – down 2.4 percent for the week.
UK banking stocks were also caught in the downturn. Barclays fell 2.7 percent to 399.85p, while Lloyds Banking Group declined two percent to 88.89p.
Chris Beauchamp, chief market analyst at IG, described the FTSE as a "victim of the broad global selloff." He suggested this was an "overdue dose of volatility" following record highs and noted that while the FTSE's lighter weighting of tech stocks had offered some insulation, "investors are never choosy in a selloff."
Broader Warnings and Key Tests Ahead
The market turbulence arrives amid growing caution from top financial institutions. The Bank of England has previously warned of the potential for a "sharp correction" in global markets due to "stretched" stock valuations fuelled by the AI boom.
Adding to the concerns, Jamie Dimon, the influential CEO of JP Morgan, stated he was "far more worried than others" about a serious market correction occurring within the next six months to two years.
All eyes are now on chipmaker Nvidia, which is scheduled to release an earnings update on Wednesday. As a bellwether for the AI sector, its performance is viewed as a crucial temperature check for the entire AI ecosystem. The firm itself lost nearly two percent in Monday's trading as bubble fears mounted, following a period earlier this month where AI-related firms lost over £750 billion in market value in just one week.
