Chip selloff drags global stocks lower on AI spending concerns

By Chibuike Oguh

NEW YORK, Nov 5 (Reuters) - Global stocks fell on Thursday, weighed down by a sharp selloff in semiconductor shares after weak earnings from Qualcomm and concerns that a Democrat-controlled US Congress could slow investment in artificial intelligence infrastructure.

Wall Street's main indexes tumbled, with the Nasdaq on track to confirm a correction from its record closing high. Technology stocks led declines among S&P 500 sectors, while the Philadelphia Semiconductor Index slumped 11%.

The Dow Jones Industrial Average fell 2.2%, the S&P 500 slid 3.4%, and the Nasdaq Composite dropped 5.2%.

Qualcomm shares dived 11% after the company's smartphone chip sales missed Wall Street estimates.

"Disappointing earnings and the Dem sweep potentially slowing the AI buildout are pressing sentiment," said Mark Hackett, chief market strategist at Nationwide. "This is a volatile and cyclical group, and when sentiment shifts, the reactions are intense."

Candidates in Tuesday's midterm elections who opposed data centre expansion and campaigned in part on moratoriums on new developments also secured victories in Texas and Georgia, adding to concerns about the outlook for AI-related infrastructure spending.

The MSCI All-World index fell 2.5%, having surrendered earlier gains, while Europe's STOXX 600 lost 0.67%.

"Hedge funds have been aggressively selling for weeks in this area. They were caught short yesterday and were forced to cover but today is a reflection that their bias is still to be short or to de-lever in the semiconductors and neoclouds," Hackett said.

OIL REVERSES COURSE

Brent crude futures was last up 2.58% on the day, at $97 a barrel, as investors refocused on uncertainties about the future course of the US war with Iran. After Trump's Republican Party suffered heavy losses in the midterm elections on Tuesday, oil prices had tumbled.

Trump acknowledged on Wednesday that the war played a role in Republicans' defeat and his vice president, JD Vance, was even more blunt on X: "The reason we lost is the war." 

Bond prices eased from the day's highs, in line with the rebound in the crude price, leaving yields on benchmark 10-year US notes down 1.22 basis points on the day at 4.88%. 

In currencies, the dollar edged into positive territory, gaining on the euro, which held at $1.1222, and against the pound, which held at $1.3466 after the Bank of England raised interest rates for the first time since 2023 and signalled more may be necessary if the Iran war continues.

Gold traded above $4,100 an ounce, having risen 5% in two days, its largest two-day jump since early April.

(Reporting by Chibuike Oguh in New York; Additional reporting by Amanda Cooper; Editing by Susan Fenton)