Stocks drop on tech sell-off, oil yo-yos on Mideast

Global stock markets experienced a general downturn on Thursday, July 16, with technology stocks, particularly in the semiconductor sector, leading the decline. This pullback follows a period of significant gains, raising investor concerns about inflated valuations.

In Asia, tech-heavy markets saw losses, which extended to European and U.S. markets. The tech-rich Nasdaq composite index in the U.S. fell by 1.5 percent. Seoul's Kospi index dropped over six percent, with major chipmakers SK Hynix and Samsung experiencing substantial declines amid growing anxiety that the artificial intelligence rally might be losing momentum.

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Fragile sentiment is leading to a continued pullback in memory chip stocks after their gravity-defying run as investors fret about elevated valuations.

Traders are questioning the long-term viability of the massive investments poured into the AI sector and whether current valuations are justified. Even Taiwan Semiconductor Manufacturing Company (TSMC), despite reporting a record net profit and providing positive future guidance, saw its shares fall in New York. The company announced plans to invest an additional $100 billion in Arizona.

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This all makes one wonder what US tech corporations will have to come up with to get investors genuinely excited again.

Meanwhile, oil prices showed volatility. They fell marginally on Thursday after the U.S. conducted a strike against Iran, which in turn retaliated against U.S. allies in the Gulf. Analysts at Rystad Energy increased the probability of no "substantive agreement" between the two nations to 55 percent, citing ongoing disagreements over Iran's nuclear program and the Strait of Hormuz.

Economic data showed U.S. retail sales increased by 0.2 percent month-on-month, aligning with expectations but indicating slower growth than in May. Analysts suggest this points to solid underlying consumer demand, partly supported by a drop in gasoline prices during the month. However, rising oil prices are beginning to challenge the consensus view that peak cost pressures are behind us.

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Higher oil is also increasingly testing the consensus view that peak cost pressures are behind us.