US Markets Hit by Declining AI Stocks
U.S. markets faced additional pressure on Wednesday as AI stocks continued to drop, marking Wall Street’s fourth consecutive loss.
The S&P 500 declined by 0.8% during intraday trading, although it’s still around the highest price level it touched last week. By 11:55 a.m. ET, the Dow Jones Industrial Average was down 120 points, or 0.3%, while the Nasdaq Composite dropped 1.3%.
Most gains made by S&P 500 companies are being wiped out due to the downturn in the AI sector. There are growing concerns about whether these once-high-flying companies have pushed their stock prices too high, and if their substantial investments in AI will yield enough returns to cover their expenses. Increasing worries about the debt levels some firms are accumulating to meet their obligations also contribute to this anxiety.
Broadcom’s stock plummeted 5.1%, Oracle fell 4.6%, and Coreweave dropped 6.5%. Nvidia, a key player in the semiconductor industry and an influential stock on Wall Street, saw a decline of 3.8%.
In a recent UBS survey, only 17% of larger companies reported running substantial AI projects. While this percentage is gradually rising, analysts suggest it may serve as a reminder for investors to be cautious about expectations for revenue growth from AI products projected for 2026.
On Wall Street, Lennar also faced losses, down 5.3% after reporting mixed earnings. Although the homebuilder’s revenue exceeded forecasts, its profits for the latest quarter fell short of expectations.
Executive chairman Stuart Miller noted the challenging environment, pointing out that customers are seeking discounts and more affordable options but lack confidence in the market. Consequently, the company provided little guidance for its financial outlook.
Progressive experienced a slip of 2.4% after announcing a 5% decline in net income compared to last year.
On a brighter note, oil companies gained from recent developments. President Trump’s actions to limit the number of “licensed oil tankers” entering Venezuela led to a rise in oil prices. This influenced benchmark U.S. crude oil to climb by 1.7% to $56.06 a barrel, following a dip to its lowest level since 2021. Brent crude also increased by 1.7% to $59.90 per barrel.
ConocoPhillips increased by 3.3%, reducing its earlier losses this year, while Devon Energy rose 3.8% and Halliburton edged up 0.9%. Oil prices have generally been dropping this year, with expectations that supply is exceeding global demand.
Netflix saw a small rise of 1.1%. Warner Bros. Discovery’s board recommended approval of Netflix’s offer for its business over a competing bid from Paramount Skydance.
However, Warner Bros. Discovery fell by 1.7%, and Paramount Skydance dropped 4.8%.
Meanwhile, U.S. Treasury yields remained stable as investors awaited a Thursday report detailing inflation trends for consumers. As of late Tuesday, the 10-year U.S. Treasury yield held steady at 4.15%.
Internationally, stock indices in Europe saw mixed results following a solid finish in Asia, with South Korea’s Kospi climbing 1.4%, narrowing its decline this week to 2.7%.
