On Tuesday, artificial intelligence stocks experienced a significant decrease, pulling Wall Street down along with them. The S&P 500 saw a dip of 0.4%, despite most stocks within the index rising. However, the Nasdaq composite fell 1.2%, and the Dow Jones Industrial Average decreased by 130 points or 0.2% from its previous record.
The downturn started in Asia when Samsung Electronics dropped 6.9% in Seoul. The decline happened even though the company released a preliminary report showing a substantial increase in its second-quarter performance. Samsung Electronics projected its operating profit to have surged approximately 1,800% compared to the previous year. Despite these robust figures, analysts commented that they were surprisingly positive but not sufficient to maintain investor interest, given the stock’s considerable rise earlier this year.
In the U.S., concerns surrounding AI stocks have escalated recently. Worries stem from high stock prices and doubts about AI’s potential to deliver significant productivity and profit gains, especially concerning investments in chips and data centers. Advanced Micro Devices fell 6.5%, Intel dropped 9.7%, and Micron Technology declined by 4.7%, significantly impacting the market.
SpaceX, owning the xAI business, saw a fall of 6.8% during its first trading session after being included in the Nasdaq 100 index. Beyond technology, Vertex Pharmaceuticals decreased by 1.4% following its agreement to acquire Crinetics Pharmaceuticals for $85 per share in cash. In contrast, Crinetics experienced a notable 98.7% surge. Rivian Automotive plunged 18.1% after announcing its plan to sell 75 million shares, thereby diluting initial shareholders’ stakes.
The S&P 500 ended the day at 7,503.85, experiencing a fall of 33.58 points. Meanwhile, the Dow Jones Industrial Average saw a dip of 130.76 points to settle at 52,925.15, and the Nasdaq composite declined by 302.47 points, reaching 25,818.69.
The stock market also confronted pressure from rising oil prices. This occurred after the British military reported projectiles striking three tankers in the Strait of Hormuz. Consequently, the U.S. revoked a license that previously permitted the sale of Iranian oil as part of efforts to cease U.S.-Iran hostilities. These developments dampened expectations that the Strait might fully reopen for oil tankers transporting crude globally from the Persian Gulf. Brent crude rose 3%, reaching $74.16 per barrel.
Increasing oil prices contribute to inflationary pressures, causing Treasury yields to climb in the bond market. The yield on the 10-year Treasury rose to 4.54% from 4.48% late Monday, and 3.97% just before the onset of hostilities with Iran. High yields have unsettled investors since oil prices surged above $100 per barrel in March, raising concerns that central banks like the Federal Reserve may attempt to control inflation by increasing interest rates. While higher rates can curb inflation, they also slow economic growth and negatively impact investment prices.
Globally, South Korea’s Kospi fell 4.9%, heavily affected by the performance of Samsung Electronics, which comprises more than a quarter of the index. Japan’s Nikkei 225 decreased by 2.1%, and Germany’s DAX saw a 1.4% reduction, marking significant movements in international markets.
AP Business Writers Matt Ott and Elaine Kurtenbach contributed to this report.
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