NEW YORK (AP) — AI stocks are veering back down the roller coaster on Friday and pulling Wall Street behind them.
The S&P 500 fell 0.6% and is heading for just its second losing week in the last 13. The Nasdaq composite, which has a heavy emphasis on tech stocks, was down 1%, as of 9:35 a.m. Eastern time. The Dow Jones Industrial Average, which has less of an emphasis on tech, was down a more modest 0.4%, or 223 points.
The slump started in Asia, where
stock indexes tumbled 4.2% in Japan and 5.8% in South Korea. There, as well, the culprits were stocks of companies that have been swept up in the mania around artificial-intelligence technology.
After soaring to tremendous heights and leading the market for years, AI stocks been under pressure recently because of worries their profits can’t possibly keep pace with the tremendous rallies for their stock prices. And those drops have an outsized effect because AI stocks have grown into Wall Street’s largest and most influential, giving movements for their stock prices more influence on indexes than others.
Thursday’s losses came even though the majority of stocks rose within the S&P 500.
That was drowned out by such losses as the 5.5% drop for Micron Technology. The maker of memory for computers has been a big winner this year, with its stock roughly quadrupling, because the AI boom has created a surge of demand for its products.
But investors also saw the downside of that surge the day before, when Apple said it had to raise prices on many of its products by significant percentages to make up for the increases in memory prices. The worry is that such higher prices could ultimately lead to lower demand.
Highlighting the roller-coaster ride that AI stocks have been on, SpaceX fell 1% below $152, toward its lowest level since its ballyhooed debut on Wall Street earlier this month. After initially selling its stock at $135 apiece, the price briefly soared above $225 within its first few days of trading. Besides rockets, SpaceX also owns the xAI artificial-intelligence business.
The drops for stocks came even as oil prices slumped back toward where they were before the war with Iran sent them surging. The price for a barrel of Brent crude sank 3% to $73.23. Benchmark U.S. crude fell 3.2% to $69.65 per barrel.
In the bond market, Treasury yields held relatively steady. The yield on the 10-year Treasury edged down to 4.39% from 4.40% late Thursday.
High yields in bond markets worldwide caused by worries about inflation are threatening to slow economies, and they have already sent rates higher for mortgages and other kinds of loans. High yields also hurt prices for investments, particularly those seen as the most expensive. That raises the pressure on AI winners.
In Japan, a 12.5% plunge for Softbank Group Corp led the Nikkei 225 lower. The company is a major investor in OpenAI, the maker of AI chatbot ChatGPT, and a report in The New York Times suggested OpenAI is considering delaying an initial public offering of its stock to next year from the second half of this year.
Such an IPO would give OpenAI the chance to raise more cash to spend on data centers, as well as the opportunity for early investors like Softbank to cash out some of their holdings. But the recent stumbles for SpaceX’s stock and for AI stocks broadly may be a signal of less appetite for big AI stocks among investors.
In South Korea, sharp drops for AI winners also dragged the market lower. SK Hynix fell 8.4%, and Samsung Electronics sank 5.3%.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
