Global stock markets experienced a downturn on August 20, 2025, as a significant sell-off in U.S. technology stocks, particularly those associated with artificial intelligence, impacted investor sentiment. Nvidia's stock fell by 5.24% to $170.40, and Palantir's stock dropped by 6.61% to $147.32.
These market movements were influenced by an MIT report indicating that 95% of generative AI investors are not yet realizing financial returns, raising questions about the sustainability of the current AI boom. European markets followed suit, with the STOXX 600 index decreasing by 0.2%, and the UK's FTSE 100 index also falling by 0.2%. The FTSE 100 closed at 9,211.48 points.
In the United Kingdom, July inflation data showed a rise to 3.8%, up from 3.6% in June, driven by increased costs for accommodation and travel, particularly airfares. This inflation uptick limits the Bank of England's flexibility regarding interest rate adjustments. Defence stocks also saw a decline, influenced by evolving U.S. policy suggestions and hopes for a potential peace deal in Ukraine.
Asian markets also reflected the global sentiment shift. Japan's Nikkei 225 index lost 1.5%, closing at 42,888.55 points. This decline was attributed to the broader Wall Street tech sell-off and a general sense of caution ahead of the Jackson Hole Economic Policy Symposium, scheduled for August 21-23. Federal Reserve Chair Jerome Powell is expected to provide insights into the economic outlook and future monetary policy at this event.
Market futures are currently pricing in a strong possibility of a quarter-point rate cut in September. Adding to market unease are discussions surrounding potential U.S. government intervention in the technology sector, including proposals for revenue sharing and federal stakes in companies. The U.S. Federal Reserve maintained its key borrowing rate at the 4.25%-4.5% range, a stance held since December 2024, reflecting ongoing concerns about inflation and economic growth.
The market's attention is now keenly focused on Powell's address at Jackson Hole for further clarity on economic trajectories. The interconnectedness of global financial systems and the pervasive influence of U.S. economic policy were underscored by the day's trading activity.