US stocks turned higher on Friday, while the FTSE 100 (^FTSE) and European stocks also reversed their early losses as a tech rout that bruised Wall Street this week attempted to stabilise ahead of the weekend.
Traders were reassessing concerns about the impact of AI disruption and the risks of hefty Big Tech spending. According to IG, around $1tn (£737m) has been wiped from the market value of the S&P 500 software index after it posted a fall of 21% from its 200-day average.
The plunge came as Amazon (AMZN) shares plunged in after-hours trade on Thursday, down 8% pre-market, as the company projected a surge of more than 50% in capital expenditures this year.
The retailer plans to pump $200bn into its AI efforts in 2026, joining other tech giants in a spending spree to build out AI infrastructure.
The news initially spooked investors, who were concerned about returns on the investment. Amazon, Microsoft (MSFT), Google (GOOG) and Meta (META) are expected to collectively spend more than $630bn on AI investments this year alone.
Charu Chanana, of Saxo Markets, said: “When AI starts to replicate tasks traditionally performed by professionals – drafting, analysing, coding, reviewing – it naturally raises questions about the long-term pricing power of certain software products.
“Investors are no longer impressed simply by the presence of AI features. This is why the pressure has shown up most clearly in (software as a service): it’s where the market is first forced to debate what AI will replace, who retains pricing power and who absorbs the costs of adoption.”
Investors have seen a rotation out of expensive growth stocks into more defensive, value-oriented sectors such as consumer staples, energy and industrials, with rising short interest and falling hedge fund exposure adding to pressure.
Friday’s tentative risk-on tone extended beyond stocks, as bitcoin (BTC-USD) climbed steadily back to above $68,000, having touched a 16-month low overnight. But the biggest cryptocurrency is still on track for its worst weekly performance since 2022 after wiping out all of its post-Trump election gains this week.
London’s benchmark index (^FTSE) was 0.5% higher in afternoon trade
Germany’s DAX (^GDAXI) climbed 0.7% and the CAC (^FCHI) in Paris headed 0.4% into the green
The pan-European STOXX 600 (^STOXX) was up 0.7%
The S&P 500 (^GSPC) rose 0.5%, while the Nasdaq Composite (^IXIC) added roughly 0.4%. The Dow Jones Industrial Average (^DJI) also reversed course, moving up 0.8% as the indexes began retracing sharp closing losses.
The pound was 0.5% up against the US dollar (GBPUSD=X) at 1.3608