Sharp drops for AI stocks overwhelm markets worldwide as oil prices jump

Sharp drops for AI stocks overwhelm markets worldwide as oil prices jump Datacenter and chip costs fueled sharp decrease in AI sector although non-AI stocks still had a strong showing

The latest shudder for stocks in the AI industry pulled markets lower worldwide on Thursday, while oil prices hit their highest levels since May on worries about the war with Iran .

The S&P 500 fell 1.2% for its worst day since July, while the Nasdaq composite tumbled 2.6%. The weakness for tech stocks was so overwhelming that it masked strength for the rest of the US market, in which the majority of stocks actually rose. The Dow Jones Industrial Average added 11 points, or less than 0.1%.

AI-related stocks have been swinging on worries that their boom may be under threat because of how expensive it’s become to borrow money to build datacenters and buy more AI chips. Concerns also remain that their prices shot too high following a years-long frenzy, even though companies in the industry continue to report growth.

Lam Research, whose equipment and services help make semiconductors, reported gains in profit and revenue for the summer that were slightly stronger than analysts expected, for example. Usually, that helps boost a stock’s price, but Lam Research’s tumbled 11.8%.

Other big tech stocks likewise fell following quarterly reports that included at least some encouraging nuggets.

Meta Platforms, which is pushing its Muse AI agent, lost 7% after reporting stronger revenue for the latest quarter than analysts expected, shedding tens of billions in market value, though its profit fell short. The company behind Facebook and Instagram also said it was creating a new class of stock to raise money to pay for AI investments and other expenses.

Tesla fell 3.1% after reporting a stronger profit for the summer than analysts expected, though its revenue was weaker than forecast.

The global tide against AI stocks knocked Nvidia down 4.4%. Because the chip giant is the largest company on Wall Street by total value, movements for its stock carry more weight on the S&P 500 than any other, and it was the single strongest force pulling the index lower.

CoreWeave, which has borrowed money to buy Nvidia’s AI chips that it rents out to customers over the cloud, has been particularly shaky in recent weeks because of worries about its debt. It dropped 10.1%.

The weakness for AI and other tech stocks began in Asia, where indexes are full of players in the industry. South Korea’s Kospi tumbled 3.5%, Hong Kong’s Hang Seng dropped 3% and Japan’s Nikkei 225 sank 2.7%.

Also weighing on global stock markets was a jump in oil prices.