AI Stocks Lead Market Decline Amid Investor Concerns

On Tuesday, the stock market experienced a downturn, largely influenced by a decline in artificial intelligence stocks. The S&P 500 fell by 0.4%, even though most stocks in the index showed gains. The Nasdaq composite dropped 1.2%, while the Dow Jones Industrial Average decreased by 130 points or 0.2%.

The market’s weakness began in Asia, especially with Samsung Electronics’ significant 6.9% drop in Seoul. The company’s preliminary reports for the second quarter indicated a strong performance, with an expected 1,800% rise in operating profit from the previous year. Although analysts viewed these figures as strong, investors remained unsatisfied, possibly due to Samsung’s stock having already more than doubled this year.

AI stocks in the US have recently faced pressure due to concerns about overvaluation and skepticism regarding the AI industry’s ability to justify substantial investments in chips and data centers. Notable declines included Advanced Micro Devices at 6.5%, Intel at 9.7%, and Micron Technology at 4.7%.

SpaceX, owning the xAI business, dropped 6.8% during its first session after being added to the Nasdaq 100 index. Other sectors also saw movements, with Vertex Pharmaceuticals declining 1.4% after its announcement to acquire Crinetics Pharmaceuticals for $85 per share. Crinetics’ stock saw a remarkable increase of 98.7%. Rivian Automotive faced an 18.1% drop following its decision to sell 75 million shares.

The S&P 500 concluded the day at 7,503.85, having lost 33.58 points. The Dow Jones Industrial Average decreased to 52,925.15, down by 130.76 points, while the Nasdaq composite fell to 25,818.69, losing 302.47 points.

Global stocks also came under pressure due to rising oil prices after the British military reported that three tankers in the Strait of Hormuz were hit by projectiles. This situation led the United States to revoke a license for the sale of Iranian oil, impacting hopes for a full reopening of the Strait. Brent crude prices rose by 3% to settle at $74.16 per barrel, raising concerns about inflation.

Higher oil prices contributed to climbing Treasury yields in the bond market, with the 10-year Treasury yield increasing to 4.54% from 4.48% recorded late Monday. This rise comes from a previous level of 3.97% before tensions with Iran escalated, sending oil prices soaring above $100 in March.

Global investors worry that elevated inflation might lead the Federal Reserve and other central banks to increase interest rates. While higher rates can manage inflation, they can also slow economic growth and negatively affect various investments.

In international markets, South Korea’s Kospi dropped 4.9%, heavily impacted by Samsung Electronics, which constitutes more than a quarter of the index. Japan’s Nikkei 225 and Germany’s DAX also saw declines, dropping 2.1% and 1.4%, respectively.

The decline in AI stocks and rise in oil prices highlighted the market’s susceptibility to external economic factors and investors’ ongoing concerns about growth and inflation.