Slumping AI stocks drag down markets around the world

Slumping AI stocks drag down markets around the world

NEW YORK (AP) — Drops for computer chipmakers and other winners of the artificial-intelligence boom dragged down stock markets worldwide on Thursday.

The S&P 500 fell 0.5%, even though more stocks rose within the index than fell. The Dow Jones Industrial Average dipped 105 points, or 0.2%, and the Nasdaq composite sank 1.5%.

Nearly three out of every four stocks rose within the S&P 500 after more of the country's biggest companies reported better earnings for the latest quarter than analysts expected.

Abbott jumped 10.7% after the healthcare company delivered a fatter profit than expected and raised its forecast for earnings over the full year. J.B. Hunt Transport Services climbed 8% after the freight company likewise topped analysts' expectations for the latest quarter.

But a 1% move for Nvidia's stock packs more punch on the S&P 500 than a 1% move for any other company because it's the largest on Wall Street by value.

And Nvidia fell 2.4%, making it the heaviest weight on the index. Other AI winners also sank, giving back some of their stellar gains.

Micron Technology fell 5.6% to shave its gain for the year so far below 199%. Sandisk fell 12.6% but is nevertheless up 494% for the year so far. Western Digital sank 9.2% but is still up 171% for the year so far.

Such stocks have been under pressure for weeks because of worries that their prices shot too high and that voracious demand for computer memory and processors may not be sustainable if AI ends up not producing as much profit and productivity as promised.

All told, the S&P 500 fell 38.63 points to 7,533.77. The Dow Jones Industrial Average dropped 105.67 to 52,552.97, and the Nasdaq composite sank 387.28 to 25,881.95.

The losses came even though Taiwan Semiconductor Manufacturing Co., a bellwether of the chip industry, reported a stronger profit for the latest quarter than analysts expected. Its stock in Taiwan rose 1.2%, but its stock that trades in the United States fell 2.3%.

In South Korea, drops for AI winners like Samsung Electronics and SK Hynix dragged the Kospi index down 6.4%. It's been among the world's shakiest markets in recent weeks because of how dominant the two AI winners are in it.

The day before, the Kospi jumped 6.2%, but it's had drops of 8.9%, 7.8% and 5.3% in the last couple weeks.

A hike to interest rates by the Bank of Korea also weighed on stocks in Seoul, the first by the bank since 2023.

Higher interest rates can keep a lid on inflation, but they also slow the economy and hurt prices for all kinds of investments. And worries are rising that the Federal Reserve and other central banks around the world may have to raise rates to rein in the effects of expensive oil.