AI stock selloff drags global markets lower as Brent crude tops $113

A sell-off in artificial-intelligence stocks pulled major global markets lower on Thursday, while oil prices reached their highest level since May as uncertainty over the war with Iran continued.

The S&P 500 fell 1.2%, its worst day since July, and the Nasdaq composite dropped 2.6%. The decline in technology shares was so broad that it overshadowed gains elsewhere: most US stocks rose, and the Dow Jones Industrial Average added 11 points, or less than 0.1%.

Why AI shares fell AI-related stocks have been volatile on concerns that their boom could be threatened by the rising cost of borrowing to build data centers and buy more AI chips. Investors also worry that share prices climbed too high during a years-long frenzy, even though companies in the sector keep reporting growth.

Lam Research, which makes semiconductor equipment and provides services, reported summer profit and revenue slightly above analyst expectations, yet its stock fell 11.8%. Meta Platforms, which is promoting its Muse AI agent, lost 7%, shedding tens of billions in market value, after reporting stronger revenue than expected but profit that missed forecasts. The company behind Facebook and Instagram also said it would create a new class of stock to raise money for AI investments and other expenses. Tesla fell 3.1% after beating profit expectations but missing on revenue.

Nvidia dropped 4.4%. As Wall Street's largest company by total value, its moves carry more weight on the S&P 500 than any other stock, and it was the strongest single drag on the index. CoreWeave, which borrows to buy Nvidia chips and rents them out over the cloud, fell 10.1% amid worries about its debt.

Oil and bonds Brent crude rose 4% to $113.17 a barrel after touching a five-month high. It has climbed from less than $97 at the start of the month as investors wait to see when the Iran conflict will let the global energy industry return to normal.

In bonds, the yield on the 10-year US Treasury tumbled to 4.97% from 5.13% late Wednesday and more than 5.30% earlier this month, a major move. The drop suggested investors were buying US government bonds as a safer asset while AI stocks fell. A report also said fewer US workers applied for unemployment benefits last week, a possible sign that layoffs remain low. The solid US economy has helped companies broadly increase profits and drove the US stock market to a record high earlier this month despite the many concerns.

Broader market The weakness began in Asia, where indexes are heavy with technology companies. South Korea's Kospi fell 3.5%, Hong Kong's Hang Seng dropped 3% and Japan's Nikkei 225 sank 2.7%. In Europe, France's CAC 40 lost 1.4%, hurt by a jump in yields on French government bonds amid worries about the government's debt and strained budget, with violent protests adding pressure to spend more.

Two out of every three S&P 500 stocks rose on Thursday, but the declines in influential tech shares overwhelmed them. Procter & Gamble, Lockheed Martin and CSX were among companies topping profit expectations. Procter & Gamble shares rose 5.6%; CEO Shailesh Jejurikar said the company expected "geopolitical and economic challenges" to continue but stood by its full-year forecasts for revenue, profit and other measures. The company owns brands including Crest, Olay and Oral-B.

All told, the S&P 500 fell 93.74 points to 7,663.43. The Dow added 11.89 points to 52,867.98, and the Nasdaq composite tumbled 694.00 points to 26,008.86.

Source: The Guardian Technology.