Wall Street Faces Volatile AI Stock Movements

Recent fluctuations in artificial-intelligence stock prices significantly impacted Wall Street on Tuesday. The S&P 500 saw a 0.3% decline, swinging from an initial 1% gain to a midday loss of 2.3%, further retreating from its peak high reached a week earlier. Meanwhile, the Dow Jones Industrial Average rose by 86 points or 0.2%, and the Nasdaq composite fell by 1%.

AI-related companies, particularly those in the chip, memory, and other critical AI components industry, initially showed gains but ended in losses. Micron Technology, for example, shifted from a 4% rise to a 10% plunge before closing down 1.4%. This followed previous sharp movements, including a 9.9% rise after a 13.3% drop. The rapid increase in Micron’s stock earlier this year drew skepticism from some critics who argue that the rise might be unsustainable.

The recent industry sell-off raises questions about whether AI stocks are experiencing a short-term correction or a prolonged downturn. Notably, major AI firms are planning to list their shares on US exchanges with high pricing anticipated. OpenAI, creator of ChatGPT, recently filed confidential documents with US regulators, while SpaceX might initiate an IPO soon.

The decline in AI stocks overshadowed potential gains from falling oil prices. Despite the fluctuations in the S&P 500, nearly 75% of its components increased in value as Brent crude oil prices dropped 3% to $91.45 per barrel. Hopes and uncertainties about a US-Iran agreement to reopen the Strait of Hormuz contributed to these oil price changes. The reopening would facilitate crude deliveries from the Persian Gulf.

Oil prices partially recovered after President Donald Trump accused Iran of downing an American military helicopter, urging a US response. Rising oil prices, exacerbated by the conflict, accelerated inflation in the US, impacting consumers and raising global bond yields, adding pressure on stock prices. The 10-year Treasury yield decreased to 4.52% from 4.56%, although still high compared to pre-war levels of 3.97%.

Upcoming US inflation data, expected later in the week, includes consumer price updates on Wednesday and wholesale price data on Thursday. High inflation and strong job market indicators suggest the Federal Reserve might raise its key interest rate before year-end. While higher rates aim to restrain inflation, they threaten economic growth and could negatively affect stock values, particularly AI-related investments, as borrowing costs rise.

Airline stocks benefitted from decreased oil prices, reducing fuel cost pressures. American Airlines shares increased by 3.6%, and Delta Air Lines rose by 3.8%. J.M. Smucker saw a 10.4% rise after outperforming profit expectations, attributed to increased prices for coffee and baked goods. Stronger than expected earnings results contributed to the S&P 500’s recent performance.

In deal news, Nuvalent’s shares soared 39.3% following GSK’s $10.6 billion acquisition announcement. GSK, based in the UK, saw its US-traded shares increase by 1.2%. Overall, the S&P 500 fell by 19.08 points to 7,386.65. The Dow rose by 86.10 points to 50,872.11, while the Nasdaq decreased by 250.84 points to 25,678.82.

International markets followed suit, with European indexes slightly declining after Asian markets experienced sharper changes. South Korea’s Kospi rebounded by 8.2%, recovering nearly all of Monday’s 8.3% plunge, driven by major tech stocks like SK Hynix and Samsung Electronics.

Contributors: AP Business Writers Matt Ott and Elaine Kurtenbach.