Wall Street Faces Severe Sell-Off; AI-Linked Stocks Take a Hit
A ferocious sell-off engulfed Wall Street on Thursday, predominantly affecting stocks associated with the expansion of artificial intelligence data centers.
The turmoil effectively obliterated the previous day’s gains, which had marked the stock market’s most significant surge in three months.
The S&P 500 plummeted 4.4 percent, signifying its most drastic decline since U.S. President Donald Trump rattled global markets in April 2025 with his controversial “Liberation Day” tariffs.
Meanwhile, the Dow Jones Industrial Average experienced a downturn of 1,833 points, or 3.4 percent, while the Nasdaq Composite fell sharply by 5.5 percent.
Specifically, the Nasdaq, laden with AI-centric and various tech stocks, receded 11.9 percent from its all-time zenith established last month. Market aficionados refer to a retraction exceeding 10 percent as a “correction.”
In Canada, the primary stock index reported a loss of 736.13 points, settling at 35,605.27, pressured by declines in the technology sector.
Concurrently, the Canadian dollar traded at 71.48 cents against the U.S. dollar, down from 71.63 cents the preceding day.
Global stock markets also faced strain as declines persisted among companies that had previously profited from the artificial intelligence technology surge.
In South Korea, the Kospi index plummeted by 5.3 percent. Many investors have been jittery, fearing a deceleration in the construction of additional AI data centers due to escalating borrowing costs. Critics have voiced concerns over inflated AI stock valuations, suggesting a bubble may have formed.
Political Landscape Undermines AI Investment Surge
The U.S. midterm elections held on Tuesday introduced yet another impediment to the AI investment frenzy. The Democratic party’s sweeping victories raised alarms regarding potential regulatory pauses on the construction of new data centers.
Voters, spanning the political spectrum, have expressed trepidation about artificial intelligence, particularly regarding the surging electricity costs incurred from operating data centers.
Any deceleration in AI data center construction would inherently limit the demand for AI chips, alongside electricity and various products crucial to the ongoing AI-driven economic expansion.
Nvidia, emblematic of the AI boom, suffered a significant blow, declining by 9.3 percent and serving as the heaviest anchor on the S&P 500.
The company now stands 2.6 percent lower year-to-date following three preceding years of extraordinary annual gains—39 percent, 171 percent, and 239 percent, respectively.
Other notable declines included Advanced Micro Devices, which plummeted by 17.3 percent, and CoreWeave, a cloud-based provider of AI chip access, which sank by 9.8 percent. GE Vernova, a company aiding data center operations, fell 7.5 percent.
The ramifications for investors were exacerbated by the dominance of AI chip stocks on Wall Street, as their movements significantly influence overall market performance.
For instance, a one percent fluctuation in Nvidia’s stock can alter the S&P 500 more than the same percentage change in virtually any other stock.
Thursday’s downturn was widespread, with early gains for most stocks swiftly evaporating.
Among the few success stories, AppLovin surged by 31 percent following a robust earnings report that exceeded analysts’ projections.
The company also announced intentions to allocate up to $3.2 billion U.S. toward share buybacks, augmenting the total potential value of its repurchase program to $3.6 billion U.S.
Tapestry experienced a 7.1 percent rise buoyed by better-than-anticipated profit results, alongside an upward revision of its revenue and earnings outlook for the fiscal year.
Overall, the S&P 500 dipped by 334.89 points, culminating at 7,353.73. The Dow Jones Industrial Average fell by 1,833.06 to 51,523.06, and the Nasdaq Composite retreated by 1,421.52 to 24,315.00.
In alternative financial metrics, the initial tumult following the U.S. midterm election results appeared to abate somewhat.
The price of Brent crude oil rose by 3.9 percent to $98.29 U.S., recuperating a portion of its nearly nine percent decline from the preceding day.
Uncertainty continues to loom over the situation in Iran and the prospective stabilization of the global energy sector.
In the bond market, Treasury yields continued their descent, with the yield on the 10-year Treasury falling to 4.84 percent from 4.90 percent late Wednesday.
Having peaked at 4.95 percent on election night and surpassed 5.30 percent last month, this trend might indicate investors’ inclinations to seek refuge in U.S. Treasury bonds amidst the stock market’s volatility.
Source link: Cbc.ca.
