Global equity markets ended Thursday with limited overall movement as investors reassessed technology valuations and the sustainability of spending on artificial intelligence infrastructure. The combination of higher-rate concerns and questions about future data-centre demand has intensified selling in parts of the technology and semiconductor sectors, although strength in healthcare and materials helped U.S. markets recover from early losses.

AI Spending Concerns Weigh on Technology

Investors have become increasingly cautious about valuations across the AI ecosystem, with growing debate over whether demand for data centres can justify the substantial spending required to build computing infrastructure. The concern has particularly affected technology and semiconductor stocks, which have been among the most prominent beneficiaries of the AI investment cycle.

The Philadelphia Semiconductor Index fell nearly 1% on Thursday, extending pressure on chip-related companies. The decline reflects a broader reassessment of the relationship between AI demand, infrastructure investment and valuations as investors seek clearer evidence that spending can translate into sustainable commercial returns.

U.S. Markets Recover From Early Losses

Wall Street initially moved lower but the S&P 500 and Nasdaq reversed their early losses and finished higher. Healthcare and materials stocks provided leadership, while the Dow Jones Industrial Average gained 1%.

The mixed performance highlights the rotation occurring beneath the surface of the broader market. While technology stocks remain vulnerable to changes in interest-rate expectations and concerns surrounding AI valuations, other sectors can benefit from different market dynamics. This divergence has become increasingly relevant as investors assess whether technology-led gains can continue to support broader equity markets.

Fed Expectations Remain in Focus

Monetary policy remains another major variable for global markets. FedWatch data showed investors assigning a 27% implied probability to a Federal Reserve rate hike on October 28, compared with a 73% probability of leaving rates unchanged.

Although the implied probability of a hike remained below the likelihood of a hold, the prospect of additional tightening continues to influence valuations for rate-sensitive assets. Higher borrowing costs can place particular pressure on companies whose valuations depend heavily on expectations for future growth, adding another challenge for AI and technology shares.

Asia Absorbs the AI Shock

Concerns about the AI investment cycle were particularly visible in Asia, where shares in South Korea and Japan came under heavy pressure. Both markets have significant exposure to semiconductor and technology companies, making them sensitive to changes in expectations surrounding global chip demand and AI infrastructure spending.

The dollar also retreated from its recent 18-month peak, adding another dimension to global financial conditions. Going forward, investors will monitor changes in U.S. rate expectations, technology valuations and evidence of sustained data-centre demand. The durability of AI spending will remain a central market question, while movements in bond yields and the dollar could determine whether pressure on technology stocks broadens or stabilizes. The ability of non-technology sectors to sustain market gains will also be important in determining the resilience of global equities.