The rollercoaster ride for AI stocks came to a head on Tuesday, with Wall Street stocks also falling.
The Standard & Poor’s 500 fell 0.4%, even as most stocks in the index rose. The decline in stocks in the artificial intelligence industry caused the Nasdaq Composite Index to fall by 1.2%, while the Dow Jones Industrial Average fell 130 points (0.2%) from its all-time high.
The downturn started in Asia, with Samsung Electronics falling 6.9% in the Seoul market. The tech giant released preliminary second-quarter results, and the numbers were strong. Samsung Electronics announced that operating profit will increase by approximately 1,800% compared to the same period last year.
Analysts called the numbers surprisingly good, but it was still not enough for investors, given that Samsung Electronics’ stock price has more than doubled since the beginning of the year.
On Wall Street, AI stocks have come under similar pressure in recent weeks over concerns that their prices have risen too high and that AI won’t generate enough productivity or profits to justify investments in chips and data centers.
Advanced Micro Devices’ 6.5% drop, Intel’s 9.7% drop and Micron Technology’s 4.7% drop were the biggest in the market.
SpaceX, which owns the xAI business, fell 6.8% in its first trade after being included in the Nasdaq 100 index.
Elsewhere, shares fell 1.4% after Vertex Pharmaceuticals announced it had agreed to acquire Crinetics Pharmaceuticals for $85 per share in cash. Crinetics, which develops drugs to treat endocrine diseases, soared 98.7%.
Rivian Automotive fell 18.1% after the electric car company announced it would sell 75 million shares of its stock. This is a move that dilutes the ownership of previous shareholders.
Overall, the S&P 500 fell 33.58 points to 7,503.85. The Dow Jones Industrial Average fell $130.76 to $52,925.15, and the Nasdaq Composite Index fell $302.47 to $25,818.69.
Rising oil prices also put pressure on stocks after the British military said three tankers had been hit by projectiles in the Strait of Hormuz. The United States later revoked a license that had allowed the sale of Iranian oil as part of an interim agreement to end fighting between the United States and Iran.
That hurt hopes that the Strait of Hormuz could be fully reopened to tankers carrying crude oil from the Persian Gulf to customers around the world.
Brent crude oil, the international standard crude oil, rose 3% to settle at $74.16 per barrel.
In the bond market, U.S. Treasury yields rose as rising oil prices put upward pressure on inflation. The yield on the 10-year U.S. Treasury rose to 4.54% from 4.48% late Monday, up from just 3.97% before the war with Iran began.
High yields have spooked investors around the world since war-induced oil prices exceeded $100 a barrel in March. The concern is that high inflation could force the Federal Reserve and other central banks to raise interest rates. A rise in interest rates can suppress inflation, but at the same time it slows down the economy and negatively affects the prices of all types of investments.
In overseas stock markets, South Korea’s Kospi fell 4.9% as Samsung Electronics alone accounted for more than a quarter of the index.
Japan’s Nikkei Stock Average fell by 2.1% and Germany’s DAX fell by 1.4% due to two major price movements around the world.
Cho writes for The Associated Press.
