AI Stock Sell-Off Leads to U.S. Market Decline
Another decline in artificial intelligence stocks led to a significant downturn in the U.S. market. The S&P 500 dropped 1.6%, marking its first consecutive decline in three weeks, returning to early May levels. The Dow Jones Industrial Average plummeted 953 points, or 1.9%, while the Nasdaq composite faced a 2% decrease.
The volatility began last week when AI stocks, previously setting records, began to fall. Concerns are rising that their prices surged too rapidly due to AI enthusiasm. The market now questions whether this fall eliminated undue optimism from stock prices or marks the start of a more prolonged downturn.
Super Micro Computer, a company dealing in AI servers, saw its shares fall by 28%. The drop followed an announcement of plans to raise $7 billion by selling shares and convertible preferred stock. Such a move often reduces ownership stakes for current shareholders.
Micron Technology experienced a volatile session. It initially fell nearly 4%, gained back slightly, only to lose 4.7% again. Despite these fluctuations, the company’s stock remains 212.5% higher for the year.
Nvidia, a major chip producer gaining from the AI surge, dropped 3.7%, affecting the S&P 500. Broadcom, another AI-focused company, fell 5.1%. Investors may be pulling funds to prepare for upcoming AI company debuts on the U.S. stock market, such as SpaceX.
High oil prices also pressured the market, impacting companies with large fuel expenditures. United Airlines dropped 6.2%, while Carnival, a cruise operator, fell 6.3%. The price of Brent crude oil rose 1.8% to $93.10, influenced by geopolitical tensions. President Trump’s warning to Iran about stalled war negotiations contributed to the price increase, affecting oil transit through the Strait of Hormuz.
Inflation in the U.S. rose to its fastest rate in three years as of May. However, Treasury yields stayed relatively stable. The yield on the 10-year Treasury increased slightly from 4.53% to 4.54%, while the two-year Treasury yield remained at 4.13%. Traders anticipate an interest rate hike from the Federal Reserve due to high inflation and a strong job market.
The overall market decline was significant: The S&P 500 fell 119.66 points to 7,266.99. The Dow Jones Industrial Average lost 953.33 points to 49,918.78, and the Nasdaq composite dropped 509.32 to 25,169.50.
In global markets, European indexes showed mixed results, with sharper declines observed in Asia. South Korea’s Kospi fell 4.5%, affected by losses in tech companies like Samsung Electronics. Tokyo’s Nikkei 225 decreased by 1.9% following a rise in Japan’s wholesale prices. SoftBank Group’s shares dropped 8.3% amid these developments.