Tech stocks slide toward weekly drop as AI rally hits speed bump

(Reuters) - Tech-heavy stock markets were heading for their biggest weekly falls in seven months on Friday, as investors turned uneasy about how far the rally in artificial intelligence stocks has run, while safer assets such as bonds and the yen were firm.

S&P 500 futures and Nasdaq 100 futures were about 0.3% higher by the Asia afternoon. But that followed a 1.9% drop for the Nasdaq (.IXIC) on Thursday.

For the week so far, the world's biggest tech index is down 2.8%, which if sustained would mark its largest one-week drop since April, when tariffs were announced. The Nasdaq has gained more than 50% since then.

Japan's Nikkei (.N225) fell 1.2% to head for a weekly loss of 4.1%, the largest since April, while in Seoul the KOSPI (.KS11) fell 1.8% for a 3.7% weekly fall, the largest since February.

Chip and cable makers were among the biggest losers, with tech investor Softbank Group Corp (9984.T) down nearly 20% this week. Bitcoin , sometimes a bellwether for tech sentiment, is down 8% on the week to $101,090.

MOOD SHIFT

There has been no obvious trigger for the pullback in AI-related share prices but the market reaction to recent results shows how some of the fears about a bubble in the sector and questions about profitability are starting to surface.

Late last month, Meta (META.O) stock dived after the company outlined big capital expenses as it builds data centres in an AI push. Shares in data and AI firm Palantir Technologies (PLTR.O) have also tumbled despite beating earnings forecasts.

"Sometimes it's a gradual shift in markets whereby an increasing number of people say: 'Well, I'm well positioned ... maybe I'll take some money off the table,'" said Herald van der Linde, head of equity strategy for Asia Pacific at HSBC.

"And a second one says so. And a third one. And a fourth one says, hey, these three are selling. I might maybe be selling as well, right? So it's a shift in the market sentiment that has its own sort of dynamic. That might well be unfolding a little bit now."

The S&P 500 (.SPX) closed 1.1% lower overnight and the Philadelphia SE Semiconductor index (.SOX) dropped 2.4%.

BONDS, YEN HIGHER

Bond markets rallied on a clamour for safety and also as some second-tier U.S. employment data pointed to a wave of layoffs that could support further U.S. rate cuts.

Benchmark 10-year U.S. Treasury yields fell 6.4 basis points to 4.09% on Thursday after outplacement firm Challenger, Gray & Christmas said there had been a surge in announced job cuts in October. The yields were steady on Friday.

Such private surveys have gained attention in the market while a prolonged U.S. government shutdown has halted official U.S. data publication.

The move lower in yields pulled down the dollar, though it was set for a fairly steady week. The euro was mostly steady through the Asia session at $1.1535 .

The safe-haven yen was set for a modest weekly rise of about 0.3%, and was last at 153.47 per dollar.

Sterling jumped after the Bank of England left interest rates on hold, though the likelihood of a cut in December capped gains and it traded a fraction lower at $1.3115 in Asia.

Safe-haven gold was briefly trading above $4,000 an ounce and Brent crude held at $63.58 a barrel.

Soybean prices headed for a weekly drop with no sign yet of big Chinese orders, after the White House said Beijing had pledged to buy 12 million tons by year end.

Editing by Lincoln Feast and Jacqueline Wong