Computer chipmakers and other beneficiaries of the artificial intelligence surge are facing declines again on Thursday, negatively impacting global stock markets. This downturn has overshadowed the otherwise positive performance of many sectors on Wall Street, resulting in a mixed day for U.S. stocks.
The S&P 500 dropped 0.5%, coming off a day when it nearly reached an all-time high from the previous month. The Dow Jones Industrial Average decreased by 153 points, or 0.3%, as of 2:29 p.m. Eastern Time, while the Nasdaq composite was down by 1.2%.
Despite these losses, the majority of stocks on Wall Street had risen earlier, buoyed by impressive profit reports from several major companies that exceeded analysts’ expectations.
Shares of Abbott surged 10.9% following the healthcare company’s announcement of higher-than-anticipated profits and an upgraded outlook for the year. UnitedHealth Group also saw a 2.5% increase after reporting better results than expected.
However, Nvidia's stock decline of 2.6% had a more significant impact on the S&P 500, given the company's position as the largest by market value on Wall Street. The performance of other AI-related stocks followed a similar downward trajectory, with several giving back considerable gains from previous highs.
Micron Technology saw a 5.2% drop, having previously enjoyed a remarkable 200% increase for the year. Sandisk fell 10.6%, yet remains up 500% year-to-date, while Western Digital’s stock decreased by 9.8%, despite a 168% gain so far this year.
These tech stocks have been under consistent pressure amidst concerns that their valuations had surged excessively and that the strong demand for computer memory and processors may not be sustainable. This speculation is fueled by doubts about the long-term profitability and productivity promised by AI advancements.
Interestingly, even Taiwan Semiconductor Manufacturing Co., a key player in the chip sector, reported better-than-expected profits for the quarter. However, its stock trading in the U.S. declined by 3.1% despite a 1.2% gain in Taiwan.
Meanwhile, South Korea’s markets suffered as declines in AI-related stocks like Samsung Electronics and SK Hynix pulled the Kospi index down by 6.4%. This market has been experiencing volatility, with recent weeks showing significant fluctuations.
A recent interest rate hike by the Bank of Korea further dampened Seoul's equities, marking the first increase since 2023. While higher rates can help keep inflation in check, they also tend to decelerate economic growth and affect investment avenues negatively. Concerns are rising that similar actions may be necessary from the Federal Reserve and other global central banks to manage the effects of soaring oil prices.
Oil prices are currently near their highest levels in a month, driven by concerns that ongoing conflict in the region may disrupt oil tanker routes through the Strait of Hormuz. The price of a barrel of Brent crude edged above $86 but later settled down to $84.08, reflecting a 1% decrease compared to the previous day.
In the bond market, the yield on the 10-year Treasury increased to 4.56% from 4.55% on Wednesday, which was markedly higher than the 3.97% yield before the onset of the conflict in Iran.
Economic reports from the U.S. presented a mixed picture, affecting market sentiment. One report indicated that retail spending fell short of economists’ forecasts, although consumer spending remained robust when excluding gas station sales. Another report showed a decrease in unemployment benefit applications, signaling a steady labor market, while a third indicated better-than-expected manufacturing activity in the mid-Atlantic region.
Internationally, stock indexes largely fell in Europe and Asia, with Shanghai and Tokyo experiencing declines of 1.8% and 2.8%, respectively. In contrast, Hong Kong’s Hang Seng index rose by 1.3%, boosted by news that the Chinese cyberspace regulator approved the use of the Apple Intelligence AI tool, which will integrate Alibaba's Qwen model.
