A sharp sell-off in US technology stocks has triggered widespread concern about the impact on British savers' pensions and investment portfolios. The Nasdaq index dropped more than 3 per cent on Friday following a 1.4 per cent slide on Thursday, with major technology firms suffering huge losses. Intel shares tumbled nearly 30 per cent, wiping around £90 billion off its value, while Alphabet lost more than 12 per cent on Thursday night, erasing close to £400 billion. Amazon fell more than 3 per cent. Alphabet, one of the so-called Magnificent Seven, is now down 30 per cent since its peak in May, while the Nasdaq has fallen 7.5 per cent overall, wiping £2.5 trillion off its value. A host of US tech stocks that surged earlier this year on artificial intelligence enthusiasm are now in so-called bear market territory, down more than 20 per cent from their peaks, with some having halved in value.
The sell-off reflects growing investor concern about whether vast spending on AI infrastructure will generate returns. Neil Wilson, investor strategist at Saxo, said investors want to see returns, not just expenditure. Jake Behan, head of capital markets at Direxion, noted the market is no longer just asking how fast companies can grow, but what they must spend to get there. Dan Coatsworth, head of markets at AJ Bell, described the slump as an 'AI reality check', adding that investors are increasingly unhappy with huge sums being spent on AI infrastructure without a clear roadmap for returns. He warned that if big tech companies' bets on AI prove wrong, the fallout could be substantial.
British investors are particularly exposed to this turbulence through their pensions and Individual Savings Accounts, which hold large quantities of US technology stocks. Companies including Nvidia, Alphabet, Apple, Meta, Amazon and Intel are held in countless global funds that form the backbone of pension savings. The US now represents 73 per cent of the MSCI World benchmark, compared to 50 per cent fifteen years ago, with technology comprising more than 30 per cent of that index. This means many British savers have significant tech exposure without realising it. Coatsworth said that if technology underperforms, global funds might not provide the diversification support some investors expect.
The FTSE 100 index has held up better than US markets, closing up 7.71 points to 10,729.78 on Friday, as it benefits from limited exposure to technology and AI. Russ Mould, investment director at AJ Bell, described this lack of tech exposure as a blessing in disguise. However, the broader impact on British investors' savings remains substantial given how widely US technology stocks are embedded in global investment portfolios.