AI stocks slide as inflation and interest rate worries mount

Artificial intelligence stocks came under renewed selling pressure Thursday as concerns about how long the AI boom can last continued to rattle markets worldwide. In early trading, the S&P 500 fell 0.5 per cent and the Nasdaq composite dropped 1.2 per cent, while the Dow Jones Industrial Average gained 269 points. Nvidia was down 3.2 per cent and Advanced Micro Devices lost 5.4 per cent among technology stocks. South Korea’s Kospi fell 7.6 per cent.

A separate report signalled that inflation in the United States worsened by more than economists expected. Wholesale inflation jumped last month, driven by a sharp rise in energy costs. Inflation concerns were weighing on high-growth technology shares ahead of the U.S. earnings season, with the sector appearing headed for another sell-off before the opening bell. AI-related stocks fell again after taking a beating a day earlier.

CoreWeave, which sells cloud computing power for AI, fell another 3.8 per cent early Thursday after tumbling 15.5 per cent in the previous session, its worst day since February. GE Vernova, which is looking to electrify power-hungry data centres, dropped 3.2 per cent after a 6.2 per cent decline Wednesday. Oracle sank 1.6 per cent, adding to a loss of nearly nine per cent in the prior session. Nvidia and Broadcom were each down 1.6 per cent in early trading, while Advanced Micro Devices retreated 3.1 per cent.

The yield on 10-year bonds eased to 5.09 per cent from 5.32 per cent but remained elevated. Higher bond yields make borrowing more expensive and could make it harder for companies to raise cash to build data centres and fill them with AI chips. Inflation figures released Wednesday showed prices remain well above the Federal Reserve’s two per cent target, putting another potential rate hike before year-end in play and adding pressure to equities. The U.S. government’s latest report on wholesale prices, the producer price index, was due Thursday alongside a large batch of corporate earnings reports.

Canada’s main stock index, the Toronto Stock Exchange, fell 0.2 per cent early Thursday. Shares in Canadian technology company Celestica were down close to seven per cent.

In Asia, South Korea’s benchmark Kospi lost 7.6 per cent to 5,554.22. It has plunged more than 16 per cent over the past month and is well below the 9,000 mark it crossed in June, when optimism about the global AI boom drove it to an all-time high. Samsung Electronics slid 9.5 per cent and South Korean memory chipmaker SK Hynix plunged 11.1 per cent.

Japan’s Nikkei 225 tumbled 4.9 per cent to 64,425.95. OpenAI investor SoftBank Group lost 9.3 per cent. Chip equipment maker Tokyo Electron dropped 7.8 per cent, while memory chipmaker Kioxia Holdings fell 12.3 per cent.

Taiwan’s Taiex, another market that benefited from the AI boom, fell 3.4 per cent. Its leading chipmaker, Taiwan Semiconductor Manufacturing Co. (TSMC), dropped two per cent ahead of its earnings report. TSMC reported another record profit for the latest quarter on Thursday, beating analysts’ expectations, and said demand for AI remains very strong.

“The problem for heavily technology-weighted markets such as Korea and Taiwan, and to a lesser extent Japan, is that any risk to perceived AI spending growth may lead to slower demand growth for chips and equipment,” said Lorraine Tan, Morningstar’s director of equity research for Asia. “The key issue is a possible mismatch between the market’s growth expectations for the tech sector and what may eventuate,” she said.

Hong Kong’s Hang Seng fell one per cent to 24,062.72, and the Shanghai Composite slipped 1.6 per cent to 3,707.48. Australia’s S&P/ASX 200 edged down 0.1 per cent to 8,719.70. At midday in Europe, Britain’s FTSE 100 was up 0.7 per cent, France’s CAC 40 had given back 0.3 per cent and Germany’s DAX was down 0.4 per cent.

Oil prices fell as tensions and uncertainty surrounding global supply and the situation in the Middle East persisted. Brent crude, the international benchmark, declined more than one per cent to US$104.91 a barrel. That remained elevated compared with the roughly US$72-a-barrel level before the Iran war began in late February. U.S. crude rose 23 cents a barrel to US$95.32.

This report includes material from Global News’ Ariel Rabinovitch.