The relief that came with the easing selloff across the metals space lasted until news broke that Anthropic, an AI startup backed by Amazon and Google, had rolled out a new AI tool designed to handle legal and research work traditionally done using paid databases. The announcement spooked markets, triggering a sharp selloff in software companies that sell data analytics and decision-making tools to lawyers, banks and corporates, on fears that AI and new players are coming for their lunch — and at an accelerated pace.
Yesterday was therefore marked by panic and a fresh wave of selling, particularly among software companies. In Europe, RELX and London Stock Exchange Group plunged 14% and 12% respectively in the FTSE 100. Thomson Reuters lost 15%, while Experian, Pearson and Sage also saw their shares caught up in the move. Across the Atlantic, FactSet, Salesforce and Adobe sold off. Adobe, for example, fell to its lowest levels in around six years, as the arrival of AI raised competition to a level that threatens parts of its core business severely. Bigger names were hit too: Microsoft lost 2.87% and is now down roughly 25% from its November peak.
Broader tech also suffered. VanEck’s Semiconductor ETF fell 2.5%. Even Google, one of the rising AI stars of the moment, slipped 1.22% after hitting a fresh record high. The selloff spread to parts of Asia as well. Tencent, for example, fell around 3%.
However, South Korea’s Kospi largely escaped the bloodbath, as its champions Samsung Electronics and SK Hynix continue to benefit from tight memory markets and strong pricing power.
On the earnings front, AMD delivered a solid beat, with revenue above $10 billion and adjusted earnings per share of $1.53, both comfortably above Wall Street expectations. Top-line growth was driven by strong demand for data-center and AI-related products, alongside solid momentum in PCs and gaming. However, despite the headline beat — 39% growth in data-center revenue and 34% growth in the PC segment — and a confident tone from CEO Lisa Su, the outlook fell short of lofty market expectations. AMD shares fell around 8% in after-hours trading.
Nasdaq futures are slightly lower at the time of writing, suggesting no immediate escalation of yesterday’s software-led selloff. Still, the reaction to recent tech earnings raises a broader concern: stocks are being punished even after earnings beats, as investors demand more to match the sky-high valuations.
Up next, Google and Qualcomm report after the bell, while Amazon is due to release its results on Thursday after the close. By the end of the week, we should have a clearer sense of where the AI hype is heading. So far, markets have barely cheered good results — even Meta, despite delivering revenue growth tied to its AI investments, failed to hold on to its post-earnings gains.
It increasingly feels as though the AI rally is being retraced, regardless of how strong the results are.
Elsewhere, geopolitical tensions between the US and Iran have intensified after reports that the US Navy shot down an Iranian drone heading toward a US aircraft carrier in the Arabian Sea. That development pushed US crude prices up around 2.4% yesterday, with prices now consolidating just below the $64 per barrel level. As always, geopolitically driven spikes can create tactical short-term opportunities, but upside risks currently dominate given how tense the situation with Iran remains.
Zooming out, gold is back above the $5’000-per-ounce level. A few months ago, this might have been interpreted as a classic flight to safety amid equity stress and geopolitical risk. Today, however, it is less clear whether this reflects risk aversion or a quick jump from one hot trade — AI — into another — metals.
In the broader safe-haven space, options are increasingly limited. Gold has been volatile, US 10-year yields remain elevated amid US debt concerns and the prospect of further balance-sheet tightening by the Federal Reserve (Fed), and the Japanese yen continues to struggle. The USDJPY is testing its 50-day moving average to the upside near 156.30 and could extend gains into the weekend’s snap election. That leaves the Swiss franc, with the USDCHF facing resistance near the 0.78 level. The EURUSD is gently recovering after finding support near 1.1780 following last week’s dollar strength, while Cable is consolidating above 1.37.
The latter two moves are largely a US dollar story. The dollar index has come under renewed selling pressure this week ahead of US jobs data. However, the BLS has announced it will not release the latest payrolls report on Friday due to a partial government shutdown. So, today’s ADP report will take on added importance and is expected to show around 46K private-sector job additions — a weak number relative to US’ headline growth, reinforcing the view that US economic strength remains concentrated in AI-related investment rather than broad-based momentum. It is a two-speed economy, and that’s complicated to navigate for the Fed.
Hence, soft jobs data will certainly support a more dovish Fed outlook, which — in the absence of policy moves from the European Central Bank (ECB) and the Bank of England (BoE) — could lend further support to the euro and sterling versus the greenback. I continue to expect EURUSD to move back toward, and eventually above, the 1.20 level.
