Due to the fervent enthusiasm on Wall Street surrounding artificial intelligence technology, market concerns have arisen, and the selling of tech stocks intensified on Friday. There are fears that related stock prices have been pushed too high.
The S&P 500 index fell 1.8%, recording its worst single-day performance since June, and closed down for the third consecutive week in decline. Weak tech stocks dragged down the Nasdaq Composite Index by 2.9%, leading the decline among major stock indices; the Dow Jones Industrial Average fell 572 points, a decrease of 1.1%.
The U.S. stock market is still just 3.1% away from its historical high, which has increased the value of employees' 401(k) accounts. However, as the mid-term elections in the United States approach on Tuesday, the market is becoming increasingly unstable. Concerns regarding artificial intelligence have become a common issue of concern for voters across parties, and U.S. President Donald Trump has always regarded the performance of the stock market as one of the criteria for measuring his own success.
Intel's stock price led the decline, plummeting by 28.6%, marking the largest drop since 1974. The chip manufacturer's profit forecast for the last three months of this year fell short of analysts' expectations, and CEO Brian Krzanich stated that the personal computer industry continues to face pressure. Nevertheless, Intel's latest quarterly profits still exceeded analysts' forecasts.
Amazon fell 1.4% after the company reported summer profits that fell short of analysts' expectations. What may be more concerning for investors is that Amazon disclosed that it spent $42.4 billion in cash over the past 12 months based on free cash flow. The company spent $94.8 billion on property and equipment, mainly on investments in artificial intelligence technology.
A day ago, the stock price of Alphabet fell by more than 12%, recording the largest single-day decline on record. Following this, the company informed investors that its higher cash consumption during the summer, compared to the spring period, contributed to the decline in the S&P 500 index. The parent company of Google and YouTube, stated that its substantial expenditures were also related to investments in artificial intelligence.
Concerns are rising that billions of dollars in investment may not generate sufficient profits and productivity to justify such investments. At the same time, computer chip companies and other stocks that have benefited from the boom in building AI data centers are also under pressure due to fears that high interest rates could slow down further expansion of these centers.
Equity Armor Investments Portfolio Manager Joe Tagai stated in a report to investors: "We are moving from the stage of hope and dreams regarding AI transactions to the stage of 'producing results'."
NVIDIA fell by 4.2%. This chip company, which has become a symbol of the AI craze, is the biggest drag on the decline of the S&P 500, even surpassing Intel.
Meanwhile, in the cryptocurrency industry, stocks also fell due to a hacker attack on the world's largest crypto exchange. The price of Bitcoin dropped below $77,000, whereas earlier this month it was still above $86,000. A U.S.-based blockchain intelligence company stated that it is possible that a unit from North Korea launched this attack, affecting over $6 billion in crypto assets at Binance.
Coinbase Global fell by 10.6%, despite the company's latest quarterly results exceeding analysts' expectations. Strategy stated that it holds approximately 4% of the total Bitcoin supply, and the company's stock price dropped by 7.8%. Strategy also reported quarterly profits that exceeded expectations, while announcing that its chief financial officer will resign next week for personal reasons.
Outside of the tech sector, stock prices performed more robustly as many companies reported summer profits that exceeded analysts' expectations. In the S&P 500 index, the number of stocks that rose was nearly equal to the number of stocks that fell.
ExxonMobil rose 2.2%, and Chevron rose 1.8% after these two oil giants reported summer profits that exceeded analysts' expectations.
Mondelez International rose by 3.9%, following the parent company of these Oreo cookies and Ritz soda crackers reporting growth that exceeded expectations.
Colgate-Palmolive rose by 2.3% due to its increase in product prices in many regions around the world, which helped the company achieve revenue and profits that exceeded expectations.
Despite many people around the world being frustrated by high inflation and rising oil prices, market expectations for U.S. companies to achieve higher profits remain high. It is this expectation that drove the S&P 500 index to record highs earlier this month.
As of the close, the S&P 500 index fell by 140.32 points to 7,580.07; the Dow Jones Industrial Average fell by 572.25 points to 51,770.31; the Nasdaq Composite Index fell by 747.73 points to 25,437.00.
In the bond market, the yield on U.S. Treasury bonds fell, indicating that investors are seeking safer assets and purchasing U.S. Treasuries. The yield on 10-year U.S. Treasuries dropped from 4.98% at the close of Thursday to 4.93%, which is also lower than the level of over 5.30% seen earlier this month.
Despite the rebound in oil prices, Treasury yields continue to fall. Under normal circumstances, rising oil prices would push up yields as they exacerbate inflation. Brent crude oil prices increased by 2.4% to $113.43 per barrel, approaching a high range since the Iran war led to increases in oil prices and inflation.
In terms of overseas stock markets, major European stock indices showed mixed gains and losses, while Asian markets experienced greater volatility earlier on.
The South Korean Kospi index fell by 3.5%, due to concerns about the impact of AI on this market, which has a high weight of technology stocks; the Hong Kong Hang Seng Index rose by 1.5%.
The Japanese Nikkei 225 index fell by 2.1% after the Bank of Japan decided to keep interest rates unchanged, in line with the actions taken by the Federal Reserve and the European Central Bank earlier this week.
AP Business reporters Yuri Kageyama and Michelle Chapman contributed to this report.
