The Telegraph

Investors make record retreat from shares as AI crash fears rise

Story by Chris Price, Alex Singleton

Investors pulled a record amount of money from company shares in the third quarter – Jason Alden/Bloomberg

Investors pulled record amounts of cash out of equity funds during the third quarter amid concerns that an AI-fuelled boom in share prices could be poised for an abrupt halt.

Investors ran scared of “sky-high stock markets”, according to the data company’s latest Fund Flow Index.

The FTSE 100 and the S&P 500 ended last week at fresh record highs despite the turmoil caused this year by Donald Trump’s tariff campaign.

Excitement about the prospects of AI have driven markets higher, particularly in the US. On Monday, ChatGPT maker OpenAI announced a chip supply deal with AMD, sending the latter’s shares up 24pc.

Edward Glyn, head of global markets at Calastone, said it was “really unusual to see markets reaching record highs while investors are moving decisively for the exits across such a broad range of funds”.

He said: “There is a structural bias towards inflows over time as people save for their future so a prolonged period of net selling is noteworthy.”

Funds focused on the UK fared even worse, shedding £692m.

The beneficiaries were bond and money market funds, which gained £895m as investors sought out their perceived safety.

Mr Glyn added: “UK funds continue to shed capital, but selling has been more muted in the last four months in the context of a general pull-back from equities.

“Doubtless, seeing the UK market reach record levels while still not looking expensive has given some sellers pause for thought.

“But the doom loop of negative commentary on the UK economy with its dire fiscal position, soaring credit spreads, lack of growth and impending tax rises may now be winning out. Outflows are on the rise again.”

Europe defied the trend and attracted modest net buying despite the recent turmoil surrounding France’s government.

However, Sébastien Lecornu stepped down on Monday morning just 27 days after his appointment, sending the French stock market lower and its cost of borrowing higher