Wall Street Dips as AI Stocks Decline

On Tuesday, Wall Street experienced another dip following a similar trend in recent days. The S&P 500 decreased by 0.7%, marking its third consecutive modest loss since hitting its all-time high just last Thursday. The Dow Jones Industrial Average saw a decrease of 116 points, or 0.2%, and the Nasdaq composite dropped by 1.3%.

Stocks heavily involved in the artificial intelligence sector drove the decline. These stocks have fluctuated throughout the summer amid concerns about inflated prices and the sustainability of demand for data center essentials like memory and processors. If AI proves less lucrative than anticipated, the gains may not hold.

Micron Technology, a key supplier of computer memory, dropped 7%, making it one of the biggest drags on the S&P 500. Other tech giants like Nvidia and Broadcom also saw declines, by 2.3% and 3.2% respectively. Despite these fluctuations, Micron has more than tripled in value this year. However, high interest rates place more scrutiny on stocks viewed as overvalued. Bond yields, notably the 10-year U.S. Treasury, edged slightly lower to 4.70% from Monday’s 4.72%, yet remain elevated compared to pre-conflict levels with Iran.

The 30-year Treasury yield also declined but stayed close to its highest since 2007. Rising yields are partly due to high oil prices contributing to inflation, combined with concerns about substantial government debt and increased borrowing.

Brent crude, a benchmark for oil prices, rose by 0.2% to $91.02 per barrel amid uncertainty regarding U.S. and Iran negotiations over tanker movements in the Persian Gulf. Before recent conflicts, Brent crude was priced at $72.87 a barrel.

High yields have pushed the average long-term U.S. mortgage rates near their peak for the year, negatively affecting the housing market. A recent report revealed that homebuilders initiated fewer new projects than anticipated last month, weighing on stocks like Home Depot, which dipped 0.1% despite exceeding profit expectations. Richard McPhail, Home Depot’s CFO, noted that customers are leaning towards smaller home improvement projects.

Elevated yields might also slow borrowing for Big Tech investments in data centers, threatening a key growth driver for the U.S. economy. In other market news, Klarna plunged by 22.8% despite stronger-than-expected quarterly results. The company revised its 2026 financial forecasts primarily due to expectations in Germany, its largest market by volume.

Additionally, Meta Platforms saw a 4.4% drop as opening arguments commenced in a pivotal California federal trial concerning social media’s impact on children.

Overall, the S&P 500 decreased by 53.30 points to 7,691.76, the Dow Jones Industrial Average dipped by 116.38 to 53,343.40, and the Nasdaq declined by 355.20 to 26,289.71. Overseas, stock indices in Europe and Asia displayed mixed performance. South Korea’s Kospi fell by 1.5%, which is moderate compared to its recent volatility driven by major tech firms like Samsung Electronics and SK Hynix.

Contributions to this report were made by AP Business Writer Yuri Kageyama.