Stocks dip on AI jitters, big banks kick off US earnings season

By Sruthi Shankar

Oct 13 (Reuters) - World stocks dipped on Tuesday as renewed AI concerns hit high-flying chipmakers and drove investors to the safety of government bonds, while big Wall Street banks kicked off the US quarterly reporting season.

Reports of progress by Chinese memory chip maker CXMT fuelled concerns about increased competition from China's AI players, while Broadcom CEO Hock Tan likened some of the flows into the broader AI sector to "casino gambling".

The MSCI's main world stocks index dipped 0.13%, with tech-heavy stock markets of Asia and the United States feeling the brunt of the selloff.

Investors have ridden the AI wave in the past four years as massive spending powered corporate profits and economic growth, although worries over concentration risks and whether a payoff will come soon enough have weighed.

US Nasdaq futures fell 0.7%, with memory chipmaker Micron Technology down 3.8% in premarket trading and Nvidia dropping 0.8%. 

South Korea's KOSPI, a market at the heart of the global AI boom, sank more than 5%, in its sharpest one-day drop since mid-August. 

European stocks bucked the trend, helped by limited exposure to the tech sector as well as a drop in oil prices. The pan-European STOXX 600 rose 0.4% to a one-week high.

"Markets have become increasingly aware of the fact that the chip industry, especially on the memory side, is ultimately a cyclical industry," said Julien Lafargue, chief market strategist at Barclays Private Bank.

"People were potentially expecting the sector to remain undisrupted maybe for another couple of years. It looks like the news overnight means that maybe this timeline has to shrink and the competition could be more fierce as soon as next year."

STEADYING BOND YIELDS 

The benchmark 10-year yield dipped to 5.187%, inching away from the 24-year high of 5.364% it hit last week. 

A toxic mix of inflationary pressure from elevated energy prices and worries about ballooning government debt has triggered several bond selloffs in recent weeks, pushing borrowing costs to multi-decade highs across the globe. 

Charu Chanana, chief investment strategist at Saxo Bank, said investors were moving back into Treasuries after the recent sharp rise in yields, but she saw it as "a tactical rally".

"Sticky inflation, elevated oil prices and heavy government borrowing remain obstacles to a sustained bond recovery," she said.

Traders are awaiting US inflation data on Wednesday for clues on the Federal Reserve's policy path. They are pricing in an 80.6% chance that it holds rates steady later this month, up from 51% a month earlier, the CME FedWatch tool showed.

EARNINGS TEST AWAITS

Investor attention was on US bank earnings to get a gauge on the impact of the recent surge in Treasury yields on dealmaking, lending growth and funding costs.

JPMorgan Chase inched up 1% in early trading after it reported a profit increase in the third quarter, driven by investment banking and trading performances. Wells Fargo dropped 0.8%, while Goldman Sachs climbed 3% after their results. 

Oil prices eased as traders assessed supply risks from attacks on Saudi Arabia while weighing the prospect of additional diesel supplies from Russia. Brent crude futures dipped 1.8% to $104.76 per barrel, holding just below a two-week high touched a day earlier. [O/R]

The dollar eased from 18-month highs, along with a drop in yields and oil prices. The euro last bought $1.1188, while the Japanese yen was at 158.12 per dollar. [FRX/]

(Reporting by Ankur Banerjee in Singapore and Sruthi Shankar in Bengaluru; Editing by Saad Sayeed, Kate Mayberry and Alexander Smith)