Wall Street and Global Markets Hit by AI Stock Decline and Oil Price Increase

On Tuesday, Wall Street faced a downturn due to a significant drop in AI stocks. The S&P 500 experienced a 0.4% decline, even though most stocks within the index increased. The Nasdaq composite fell by 1.2%, and the Dow Jones Industrial Average decreased by 130 points, equivalent to a 0.2% drop from its record high.

The decline in tech stocks began in Asia with Samsung Electronics, whose shares fell 6.9% in Seoul. Samsung provided a preliminary view of its second-quarter performance, indicating a surge in operating profit by approximately 1,800% compared to the previous year. Despite the strong numbers, investors were not impressed as Samsung’s stock had already more than doubled in value this year.

On Wall Street, AI stocks have been under pressure recently. Concerns have been raised about their high prices and the potential that AI might not yield enough productivity and profits to justify large investments in chips and data centers. For instance, Advanced Micro Devices dropped by 6.5%, Intel slid 9.7%, and Micron Technology declined 4.7%, contributing significantly to the market downturn.

SpaceX fell 6.8% during its first trading session as part of the Nasdaq 100 index. Outside tech, Vertex Pharmaceuticals saw a 1.4% decrease after announcing its acquisition of Crinetics Pharmaceuticals for $85 per share in cash, although Crinetics’ stock jumped by 98.7%. Meanwhile, Rivian Automotive’s shares plummeted by 18.1% following its decision to sell 75 million shares, diluting its earlier shareholders’ stake.

The S&P 500 fell 33.58 points to 7,503.85. The Dow Jones Industrial Average decreased by 130.76 to 52,925.15, and the Nasdaq composite dropped 302.47 to 25,818.69. The stock markets also faced pressure from rising oil prices after reports of three oil tankers being struck in the Strait of Hormuz. The U.S. revoked an Iranian oil sale license, heightening fears that the Strait might not reopen entirely for oil tankers.

Brent crude oil, the global benchmark, increased by 3%, reaching $74.16 per barrel. Rising oil prices have added to inflation concerns, and Treasury yields climbed as well. The yield on the 10-year Treasury grew to 4.54% from 4.48% on Monday, and up from 3.97% before the conflict with Iran began.

High inflation might prompt the Federal Reserve and other central banks to increase interest rates. These higher rates can curb inflation but also slow down the economy and lower prices for various investments.

Globally, South Korea’s Kospi index dropped 4.9% as Samsung Electronics constitutes more than a quarter of the index. Additionally, Japan’s Nikkei 225 fell 2.1% and Germany’s DAX declined 1.4%, representing some of the more significant global market shifts.

AP Business Writers Matt Ott and Elaine Kurtenbach contributed to this report.