Global technology stocks dominated financial headlines this week, with dramatic swings raising fresh questions about whether enthusiasm for artificial intelligence has gone too far — and whether markets could be heading for a larger correction.
Early in the week, major U.S. stock indexes fell as the biggest technology companies dragged them lower. Initially, analysts pointed to concerns over the enormous amounts of money being poured into AI infrastructure. But by Tuesday, the selling had spread to semiconductor stocks, with South Korea’s KOSPI index dropping nearly 10% and the SOX chip index losing roughly 8%.
A strong earnings report from memory chipmaker Micron Technology on Wednesday briefly steadied things. However, calm was short-lived. Apple announced Thursday that it would be increasing the prices of iPads and MacBooks, citing rising costs for memory and storage chips — a direct consequence of the AI spending boom. Apple’s stock dropped more than 6% overnight, triggering another wave of selling across Asian markets on Friday.
The turbulence has renewed debate over whether AI-driven market enthusiasm has crossed into irrational territory. SoftBank’s Masayoshi Son weighed in this week, calling any talk of an AI bubble “blasphemy against AI.” At the same time, a number of major Wall Street firms raised their year-end forecasts for the S&P 500, arguing the current rally still has room to continue.
The late Federal Reserve Chair Alan Greenspan, who passed away at age 100 this week, famously warned about “irrational exuberance” in markets decades ago. His phrase feels newly relevant as investors grapple with the same question today.
As for the current Fed leadership, newly appointed Chair Kevin Warsh appears unlikely to take direct aim at rising asset prices. His push to reduce Fed communication — including ending forward guidance — has contributed to wide disagreements between major banks over where interest rates are headed, a situation that could itself fuel market volatility.
On Thursday, the government released the personal consumption expenditures index — the Federal Reserve’s preferred measure of inflation. The index climbed 4.1% in the year through May, topping 4% for the first time in three years. Core PCE, which strips out food and energy, rose 3.4%. Both figures matched what economists had expected. After the report, bets on a rate hike at the Fed’s very next meeting eased somewhat, though markets still see roughly an 80% chance of a hike by the September meeting.
Expectations for higher interest rates have helped push the U.S. dollar to one-year highs against major currencies in recent weeks, though it pulled back slightly following Thursday’s inflation data. The Japanese yen remains especially weak, hovering near a 40-year low past 160 yen per dollar.
Across the Atlantic, Britain grabbed attention with Prime Minister Keir Starmer announcing his resignation on Monday following months of mounting pressure and the dramatic return to parliament of key Labour party challenger Andy Burnham. UK financial markets showed little reaction on the day. Attention has now shifted to Burnham, who is seen as Starmer’s likely successor and could take office as early as next month if no other candidates step forward. Investors are eager for clarity on how he would approach economic policy and who he might select as finance minister.
Analysts caution, however, that simply swapping one leader for another won’t address Britain’s deeper challenges — sluggish productivity growth and a large welfare spending burden. With seven prime ministers in a decade, the revolving door at 10 Downing Street risks reinforcing a perception that the country has become difficult to govern, which could deter investment and deepen existing economic problems.
Energy policy is expected to be a top priority for whoever takes charge, particularly given how the recent Iran conflict underscored the risks of depending heavily on imported energy. There is speculation that this could prompt a shift in British policy on oil and gas development in the North Sea.
Adding to the region’s challenges, much of the UK and Europe has been dealing with a dangerous heatwave this week, placing strain on power systems across the continent.
On the global energy front, oil prices continued falling throughout the week, touching pre-war levels on Thursday. Crude shipments through the Strait of Hormuz reached their highest volumes since the conflict began, as traders grew more confident that a temporary U.S.-Iran peace agreement would lead to a lasting deal and a return to normal energy flows. This optimism persisted even after reports emerged Thursday that a Taiwanese ship transiting the strait had been attacked.
While cheaper oil is bringing down prices at U.S. gas stations, it may also give consumers more money to spend — potentially heating up an already warm economy and complicating the Federal Reserve’s decisions on interest rates going forward.
Next week will be shortened due to Independence Day, but investors will still have significant economic data to digest, including the June nonfarm payrolls report, as the United States marks its 250th birthday.
