Billions have been wiped off global tech stocks, but why?
It's World Business Express from the BBC World Service.
I'm Leanna Byrne.
Switzerland has reached a breakthrough deal with the US on tariffs and in the UK one pizza chain says the nation has reached peak pizza.
OK, let's start with this global tech sell-off.
Billions wiped off valuations.
AI giants like Nvidia, Alphabet and Oracle taking heavy hits.
The tech stock index Nasdaq is down nearly 2.5% this week.
Nvidia has lost $500 billion from its peak value of $5 trillion a couple of weeks ago.
And it's all raising questions about whether the AI boom has really just run ahead of itself.
It's just a few weeks since the boss of the world's largest bank, JP Morgan, Jamie Dimon, told the BBC he believed tech stocks are overvalued.
I am far more worried about that than others.
I would give it a higher probability than I think it's probably priced in the market and by others.
The amount of uncertainty.
And I put geopolitics in that category, fiscal spend in that category, politics in that category, the remilitarization of the world in that category.
All these things cause a lot of issues that we don't know how they're going to sort out.
So I say the level of uncertainty should be higher in most people's minds than what I call normal.
Takara Small is CBC's national technology columnist in Toronto and she explained to me why these AI favourites have gone from red hot to risk.
There are a couple of things that have really come together to create this situation.
One of them is that we had one of the longest government shutdowns in history.
Obviously, that led to a lack of data about everything from jobs to how the government itself is doing.
Then on top of that, you have the fact that there is an AI fatigue that's going on right now.
I know many people probably assume that AI is the be-all and end-all, but in recent months we've actually received several studies that showcase that AI, particularly in the workplace, hasn't had the gains that many companies really hoped for.
For example, there was an MIT study that found about 95 such a high number of generative AI pilots at companies are failing.
So that, on top of the fear that some of those gains that AI companies like Meta, like Palantir, like Nvidia have seen in recent months is a little bit overblown,
So we're seeing that retreat.
And honestly, a lot of talk that's comparing the current AI boom to the dot-com bubble is, which we all know devastated not just the average worker's savings but also led to a huge retreat in the stock market as well.
And profits, right?
Because a lot of these companies haven't actually made profits when it comes to their AI investments.
Exactly.
Valuations are a little off.
And then you have to factor in data capacity and chip manufacturing.
Obviously the recent tariffs.
I think the on and off support mechanisms for the tech ecosystem have been a little bit unpredictable as of late.
You throw that all in the mix.
And I don't think it's any surprise that we're seeing this type of movement.
I think a lot of tech companies really thrive on stability.
And so when you have the president of the United States changing tariff laws, maybe threatening markets like China, that has a huge impact on tech companies.
And I'm really right now honing in on NVIDIA that used to sell a ridiculous number of chips to China as well and has had to somewhat exit the market.
All of these things have a huge role in what we're seeing online.
And I think the most dangerous aspect of this is it's a little bit unknown what's to come in the new year.
I mean, will we see perhaps more friendly tech laws?
Will we see government step up and maybe invest money?
We recently saw that OpenAI required requested some financial support from the U.S. government.
And although that's not forthcoming right now, there are countries around the world that are investing heavily in this space.
So there's so many questions, so many unknowns.
And I want to add that I don't think AI is disappearing in any form.
I think we'll still see artificial intelligence in the market.
We'll is up in the air.
That was Takara Small, CBC's National Technology Columnist.
With me now, Randeep Somal, Fund Manager at M&G Investments.
Randeep, now we're talking about valuations there, but how much is wider macro trends at play or you know just factors also coming in here?
Very much so, Leanne.
I mean, we need to keep this into context.
The NASDAQ is up nearly 19% this year.
And as we've mentioned, valuations are high.
So there's an element of profit taking that we need to look into here.
Also, the fact that as people are taking money out of tech, they're putting it into base metals.
Now, the biggest growth area for base metals other than electric vehicles is also data centres.
So maybe they're just seeing other pockets of value, but also remaining AI themed as well.
So what else should we be watching out for just really quickly?
I mean, no US government data has obviously caused an overhang.
A lot of the US growth is pinged on AI and this data center boom that we're seeing.
Now, with the government being shut down for nearly two months, that data hasn't been available.
Now that it's finally open again, as that data starts to come out, when we see GDP growth, inflation and employment numbers increasing, that will either sustain or bring the story back.
Now another big story Randy, but we've just had a breakthrough deal between the US and Switzerland in the past hour to lower tariffs on Swiss goods from 39 to 15.
I mean, 39% was crippling.
This must be a big relief.
If you're Swiss, it's a huge relief.
39% was the largest tariff on any developed country that the US president had placed.
Bringing it down to 15 now, it brings it in line with what the EU is at.
So they'll be much more competitive.
In response to that, the Swiss government or the Swiss companies are now having to invest 200 billion into the US to get it down to that level.
Another story that piqued my interest, big leadership change at Walmart.
Doug McMillan stepping down after more than a decade as CEO and John Furner taking over.
But shares are down.
Why?
Because Doug Macmillan, Doug Dillon has had such a huge success at this time at Walmart.
He actually joined as a teenager stacking shelves and he's worked his way through the organization.
And in 2013, he became CEO.
The share price then was $26.
It's now well over $100.
When he joined, the big threat for shopping was Amazon.
And he's built a huge internet program at Walmart and took it into the internet age.
And he's built a huge success story with it.
Yeah, he really did turn it around in fairness.
Okay, Randeep, don't go anywhere.
Google is trying to head off a forced breakup of its ad tech business.
It's offering to tweak parts of its advertising system to keep the EU happy.
It includes giving publishers more control over pricing and making its tools work better with rivals.
But Google still plans to appeal the ruling and Brussels is signalling that it might want more.
Now environmental campaigners at COP30 say this year's UN Climate Summit in Brazil has the highest number of fossil fuel lobbyists on record.
More than 1600 delegates from oil, gas and coal now outnumber every national delegation except Brazil itself.
The BBC's climate correspondent Matt McGrath is there.
What worries some observers is the fact that around 600 of the delegates from oil, gas and coal backgrounds are registered on what are termed party overflow badges, meaning the individuals may influence behind-the-scenes negotiations.
Despite their presence, their impact is questionable.
The most recent climate cops have seen strong support from countries for transitioning away from fossil fuels.
That was Matt McGrath from Belém in Brazil.
Now, Ranteep, you might like this story.
Domino's issued a trading update and the CEO thinks Britain has hit peak pizza, so it's betting on fried chicken instead.
I mean, that's totally different to what it does.
Indeed, I think what we've actually hit is peak delivery, and the level of competition, whether it be Deliveroo or Uber Eats now, is really tucking in and hitting Domino's market share.
Yeah, I mean the thing is, I just feel like when you say competition, I mean I might be being bad here, but I think there's like better pizzas out there right than Domino's.
There is.
I mean.
The fact that we're eating at home so much more now has incentivized more and more people to do exactly this.
And it's much easier to deliver than open up a restaurant where people have to come in and eat.
That's it.
There's so many more options.
You can get deep dish.
You can get sourdough.
I'm getting hungry, to be honest.
Wrap deep, Samuel.
Thank you so much for joining us.
And that is it from World Business Express from the BBC World Service with me, Leanna Byrne.
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