Financial markets in the US and Asia have fallen sharply as investors sell off shares in technology companies, with artificial intelligence (AI) stocks hit particularly hard.

In Wednesday’s trading in New York, the S&P 500 lost 2.3% and the tech-heavy Nasdaq fell 3.6%, in their biggest one-day falls since 2022. The Dow Jones Industrial Average dropped by 1.2%.

The losses were driven by major firms including Nvidia, Alphabet, Microsoft, Apple and Tesla.

On Thursday, Japan’s Nikkei index led declines in Asia as it fell by 3%.

Shares in technology companies, especially those related to AI, have driven much of this year’s stock market gains.

AI chip giant Nvidia, which has been one of the main beneficiaries of the AI boom, saw its shares drop 6.8%. It has lost about 15% of its value in the last two weeks.

The company is set to report financial results at the end of August.

Shares in multi-billionaire Elon Musk’s electric car maker Tesla dropped by more than 12% after its latest financial results disappointed investors.

Google and YouTube parent company Alphabet’s stock price was 5% lower. Earlier this week, the company reported financial results that beat analyst expectations but said its spending would stay high for the rest of 2024.

Alphabet, like many of its competitors, has been pumping billions of dollars into the development and adoption of AI technology.

In Asia, chip makers Renesas Electronics and Tokyo Electron in Japan and South Korea’s SK Hynix were amongst the big fallers.

“Investors are now becoming more concerned about all this expenditure with AI without the revenue benefit,” said Jun Bei Liu, Portfolio Manager at Tribeca Investment Partners.

“I don’t think this will mark the start of the disbelief in AI… it just simply means investors will focus more on returns in this space than just buying the whole sector,” she added.

Investors are also wary after major surprises in the US presidential election campaign and the timing of an interest rate cut by the US central bank.