AI Stocks Decline Impacts Global Markets Amid Economic Concerns
On Thursday, computer chipmakers and other beneficiaries of the artificial intelligence boom faced another downturn, impacting global stock markets. This overshadowed the strength seen in other areas of Wall Street, resulting in mixed performances of U.S. stock indexes. The S&P 500 decreased by 0.2%, following its recent proximity to the previous month’s record high. At 11:45 a.m. Eastern time, the Dow Jones Industrial Average rose by 102 points, or 0.2%, while the Nasdaq composite fell by 0.7%.
The majority of stocks on Wall Street saw gains as several major companies reported higher-than-expected quarterly profits. Notably, Abbott surged by 11.1% after exceeding profit expectations and raising its earnings forecast for the year. UnitedHealth Group increased by 3.5% following a similar earnings report. However, Nvidia, the largest company on the S&P 500 by value, saw a 2.5% decline, exerting significant downward pressure on the index. Other AI stocks also declined, reversing some of their substantial gains from earlier in the year. Micron Technology, for example, dropped 5.7%, lowering its year-to-date increase to under 200%. Sandisk plummeted 10.6%, though it remains up 500% year-to-date, and Western Digital fell 9%, yet still shows a 170% year-to-date rise.
AI and chip stocks have been under sustained pressure amid concerns of overvaluation and skepticism over whether AI will deliver the promised profit and productivity gains. Despite Taiwan Semiconductor Manufacturing Co., a key player in the chip industry, reporting stronger-than-expected quarterly profits, its U.S.-traded stock fell by 2.2%. In South Korea, major AI stocks such as Samsung Electronics and SK Hynix dragged down the Kospi index by 6.4%. The Kospi has experienced significant volatility, including a 6.2% jump the previous day, alongside losses of 8.9%, 7.8%, and 5.3% over recent weeks.
The Bank of Korea’s decision to raise interest rates for the first time since 2023 added further pressure on Seoul’s stocks. While higher rates help curb inflation, they also slow economic growth and depress investment values. Rising fears about potential rate hikes by the Federal Reserve and other central banks are emerging due to high oil prices. Concerns over conflict with Iran, potentially disrupting oil shipments through the Strait of Hormuz, have contributed to soaring oil prices. Brent crude briefly surpassed $86 per barrel before declining to $84.75, down 0.2% from the previous day.
In the bond market, the 10-year Treasury yield increased to 4.57%, up from 4.55% on Wednesday and 3.97% before the Iran conflict. Mixed reports on the U.S. economy influenced bond market dynamics. While consumer spending at retailers fell short of economists’ expectations, spending excluding gasoline stations remained robust. Fewer applications for unemployment benefits last week indicated a strong job market, and manufacturing in the mid-Atlantic surpassed expectations.
Globally, stock indexes declined across much of Europe and Asia, with notable drops of 1.8% in Shanghai and 2.8% in Tokyo. Conversely, Hong Kong’s Hang Seng index rose by 1.3%. Alibaba gained after China’s cyberspace regulator approved the Apple Intelligence AI tool for use in China, alongside plans for integrating Alibaba’s Qwen model into Apple Intelligence.
AP Business Writers Chan Ho-him and Matt Ott contributed to this report.