Artificial intelligence stocks took another beating on Thursday, dragging markets down around the world, as investors questioned whether the industry's enormous spending spree can ever pay off. At the same time, oil prices climbed to their highest levels since May on fears about the war with Iran.
On Wall Street, the S&P 500 fell 1.2%, its worst day since July, while the tech-heavy Nasdaq composite tumbled 2.6%. The Dow Jones Industrial Average barely moved, adding less than 0.1%, as the sell-off masked an otherwise decent day in which the majority of U.S. stocks actually rose.
Meta Platforms was at the center of the storm. The Facebook and Instagram owner lost 7% after reporting revenue that beat expectations but profit that fell short, alongside billions of dollars in new spending commitments for artificial intelligence. The company also said it is creating a new class of stock to raise money for its AI investments. "It all goes back to Meta," analyst Louis Navellier said, arguing the market was "throwing the baby out with the bathwater."
Chip giant Nvidia fell 4.4%. As the largest company on Wall Street by market value, its slide was the single biggest drag on the S&P 500. CoreWeave, the cloud company that has borrowed heavily to buy Nvidia chips, plunged 10.1% amid growing worries about its debt. Tesla dropped 3.1% after posting a stronger profit than expected but weaker revenue. The semiconductor index tumbled 6.7%.
The rout carried into Asia on Friday. Tokyo's Nikkei 225 lost 1.7%, South Korea's Kospi fell 2.4%, and the Shanghai Composite slipped 1.3%. Hong Kong's Hang Seng edged up 0.2%, while Australia's S&P/ASX 200 shed 0.2%.
Energy markets added to the anxiety. Brent crude rose 0.5% to $113.73 a barrel on Friday after leaping 4% on Thursday. Brent has shot up from less than $97 a barrel at the start of the month, as uncertainty grows over when the war with Iran will allow the global energy industry to return to normal. U.S. benchmark crude added 0.6% to $100.08 a barrel.
Investors hunting for safety poured into U.S. government bonds. The yield on the 10-year Treasury tumbled to 4.97% from 5.13% late Wednesday — a major move for the bond market — and down from more than 5.30% earlier this month. The shift came even as a report showed fewer American workers applied for unemployment benefits last week, a sign layoffs remain low.
Analysts say the core worry is simple: building data centers and buying AI chips has become extraordinarily expensive, borrowing costs are high, and stock prices had run far ahead during the years-long AI frenzy. With earnings season in full swing, markets will keep testing whether the biggest spenders can turn their investments into returns — and with oil above $110 and a Federal Reserve meeting ahead, more volatility looks likely.