Wall Street Declines as AI Stocks Falter
New York’s Wall Street faced a decline on Tuesday as AI stocks continued their downward trend. The S&P 500 decreased by 0.7%, marking a third consecutive modest loss since reaching its all-time high last Thursday. The Dow Jones Industrial Average fell by 116 points, or 0.2%, and the Nasdaq composite dropped by 1.3%.
A significant factor in this decline were stocks previously buoyed by the surge in artificial intelligence. These stocks have experienced fluctuations throughout the summer, driven by concerns that their prices had risen excessively. The fear persists that demand for components such as memory and processors might dwindle if AI does not achieve the profitability initially anticipated.
Micron Technology’s stock plummeted by 7%, making it a major drag on the S&P 500. Other chip companies also declined, with Nvidia falling by 2.3% and Broadcom decreasing by 3.2%. Despite recent volatility, such stocks have seen substantial overall gains this year, with Micron more than tripling. However, in a high-interest rate environment, stocks deemed overvalued face more scrutiny.
Globally, bond markets displayed high yields. The 10-year U.S. Treasury yield slightly decreased to 4.70%, still significantly higher than the 3.97% seen before the conflict with Iran commenced. The 30-year Treasury yield also edged lower but remains near its highest level since 2007.
The rise in yields stems from high oil prices contributing to inflation. Persisting concerns over government debt levels and increased borrowing keep yields elevated.
Brent crude oil rose by 0.2%, to $91.02 per barrel, amid uncertainty regarding U.S. and Iran negotiations on allowing oil tankers to exit the Persian Gulf. Before the conflict, Brent crude was valued at $72.87 per barrel.
High yields have driven the average long-term U.S. mortgage rate near its peak for the year, negatively impacting the housing sector. A report on Tuesday revealed that homebuilders started fewer new houses last month than expected, contributing to Home Depot’s stock slipping by 0.1%, despite reporting stronger profits and revenue than anticipated.
The elevated yields may hinder the borrowing capabilities of major tech companies. This slowdown poses a risk to one of the U.S. economy’s significant growth drivers, as funding for data centers might decrease.
Elsewhere, Klarna’s stock declined by 22.8% despite better-than-expected quarterly results. The payments company adjusted its financial forecasts for 2026 due to expectations in Germany, its largest market.
Meta Platforms dropped by 4.4% amid the start of a major trial in California, where states are seeking damages for social media’s impact on children.
Overall, the S&P 500 fell by 53.30 points to 7,691.76, the Dow Jones Industrial Average decreased by 116.38 to 53,343.40, and the Nasdaq composite shrank by 355.20 to 26,289.71.
Globally, stock markets in Europe and Asia were mixed. South Korea’s Kospi fell by 1.5%, a relatively modest movement compared to recent swings caused by the influence of tech giants Samsung Electronics and SK Hynix.