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MORNING BID AMERICAS - AI scatters the tech herd

By Mike Dolan

February 4th -

What's important in the U.S. and Global Markets Today By Mike Dolan Editor-at-Large of Finance and Markets

AI is not a panacea for all. The rout of Tuesday in shares for software, data analytics, and professional services operations demonstrates how AI can have both positive and negative effects. Microsoft and AMD also saw their shares fall sharply, despite beating forecasts on headline earnings. Walmart, a retailer that was an early adopter and user of AI for its processes, became the first retailer to ever surpass $1 trillion in valuation on Tuesday. The move caps off a yearlong rally that has seen Walmart's shares rise by nearly 26%. It now joins the ranks of tech giants.

Below, I'll go into more detail. Check out my most recent column about why Australia's rate hike could be a wakeup for global central bankers. And listen to the Morning Bid podcast. Subscribe to the Morning Bid daily podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.

AI ATTACKS THE TECH HEAD The news that AI company Anthropic launched a new AI agent to automate work tasks last Friday was the 'trigger' for the ongoing sell-off of global software stocks. It took almost two trading days for the news to reach investors. This shows just how blindsided they were, even though in recent months markets have been more discriminating between winners and losers when it comes to AI. Alphabet results will be released after the bell on Wednesday. This will further test investor sentiment. Nasdaq's futures remain in the red after major Wall Street indexes fell about 1% on Tuesday. The tech herd is also scattered around the globe, with chip and hardware firms in Asia doing well while software firms in India are also affected by the downdraft. The European pharma giant Novo Nordisk fell?almost 20 percent after Wegovy warned about the profit outlook for this year amid fierce competition within the weight loss drugs industry. Investors are analyzing macro-markets to determine if there is an acceleration of economic activity. This can be seen in the dramatic jump in ISM manufacturing index and the rapid growth of business loans in the Fed quarterly loan officers survey. ISM's report on the service sector for last month will be released later. ADP's report on private sector employment is also due. The House of Representatives' vote on Tuesday ended this week's partial shutdown of the government - for at least another 10 days. However, it is too late to guarantee a complete January employment report by this Friday.

Overseas?service sector survey results were slightly lower than expected in Europe but picked up in Japan and China. Currency markets were calmer as traders awaited tomorrow's policy meetings of the European Central Bank and Bank of England. The yen dropped again before the weekend Japan elections,?and China's Yuan briefly rose to its highest levels in nearly three years as Lunar New Year approaches. Oil and gold both rose amid renewed tensions between the U.S. and Iran, which saw a U.S. drone shot down on Tuesday. Bitcoin has struggled to stabilise after reaching its lowest level in the past 20 years.

Chart of the Day

On Wednesday, a deep selloff of global software stocks began?a second session as fears about the impact AI may have on these companies' lives grew. Anthropic’s new agentic AI tool was the trigger for Wednesday's sell-off.

Investors have begun to differentiate between AI winners and losers within the tech industry itself over the last six months. OpenAI launched ChatGPT and since then, S&P500 software and service stocks are actually in the negative -?while chip stocks have almost tripled.

Watch today's events

* U.S. ISM Services PMI for January (10:00 AM EST), S&P Global service PMI (9:45 AM EST), ADP jobs for January (8:15 AM EST).

* Fed Governor Lisa Cook speaks, Richmond Fed's Thomas Barkin speaks

* U.S. Corporate Earnings: Alphabet (Arm), Eli Lilly, Qualcomm and Uber

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(source: Reuters)