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AI stocks tumble as Nasdaq, S&P 500 fall and oil hits five-month high amid Iran war fears
AI stocks fell as oil prices hit a five-month high amid Iran war fears, dragging global markets lower, while Nvidia, Meta and Asian markets saw sharp losses.
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Stocks linked to artificial intelligence (AI) fell sharply on Thursday, dragging stock markets across the world lower. At the same time, oil prices climbed to their highest level in five months as investors worried about the war involving Iran and its impact on global energy supplies.
The S&P 500 fell 1.4%, while the Nasdaq Composite dropped 2.2% as of 10:45 a.m. Eastern time on Thursday. The Dow Jones Industrial Average fell by a smaller 0.6%, or 295 points. The bigger losses in the Nasdaq reflected the pressure on technology stocks, while companies outside the tech sector performed better, according to AP.
AI stocks fall on high costs and spending worries
AI-related stocks have been unstable as investors worry about the high cost of building data centres and buying AI chips. Companies need to spend large amounts of money to expand their AI businesses, and borrowing has become more expensive. Investors are also concerned that AI stocks may have become too expensive after years of strong gains, even as companies continue to report business growth.
Lam Research, which makes equipment and provides services used in semiconductor manufacturing, reported higher revenue and profit for the summer quarter. Both figures were slightly better than analysts had expected. However, its shares fell 9.7% because its profit forecast for the final three months of 2026 was weaker than expected at the midpoint of its projected range, according to AP.
Also read: P&G raises 2027 cost outlook to $1.4 billion as higher oil prices squeeze profits
The company's shares had risen 52.4% so far in 2026 before Thursday's fall. This was nearly four times the gain recorded by the S&P 500 over the same period. The strong rise had created high expectations among investors, leaving the stock vulnerable to a fall when the company's future profit outlook disappointed them.
Meta stock falls 6.4% despite higher revenue
Meta Platforms, the parent company of Facebook and Instagram, saw its shares fall 6.4%. The company reported stronger revenue for the latest quarter than analysts had expected, but its profit fell short of expectations. Meta is also pushing ahead with its Muse AI agent as it expands its artificial intelligence business, according to AP.
Meta said it was creating a new class of stock to raise money for its AI investments and other expenses. The move comes as the company continues to spend on artificial intelligence, even though investors are becoming more concerned about the costs of developing and expanding AI technology.
Tesla shares erased an early decline and rose 0.1% on Thursday. The electric vehicle maker reported higher summer-quarter profit than analysts had expected. However, its revenue was weaker than forecast, showing that the company had mixed results for the quarter.
Nvidia shares drop as AI sell-off spreads
Nvidia, the world's leading maker of AI chips, saw its shares fall 3.8% as investors sold technology stocks. Nvidia is the largest company on Wall Street by total market value, so its share price has a major influence on the S&P 500. Its decline became one of the biggest reasons for the index's fall on Thursday, according to AP.
CoreWeave shares dropped 7.1% as concerns about the company's debt continued to worry investors. The company has borrowed money to buy Nvidia's AI chips and rents computing power to customers through cloud services. Its shares have been particularly unstable in recent weeks, and they have moved between gains and losses of around 4% on each of the previous two days.
Asian markets tumble as tech stocks fall
The sell-off in AI and technology stocks began in Asia before spreading to other markets. South Korea's Kospi fell 3.5%, Hong Kong's Hang Seng Index dropped 3%, and Japan's Nikkei 225 declined 2.7%. Asian markets were hit particularly hard because their stock indexes have large holdings in AI and other technology companies, according to AP.
Oil prices hit five-month high amid Iran war fears
Brent crude oil, the international benchmark, climbed 2.6% to $111.60 a barrel after touching its highest level in five months. Oil prices have moved between $97 and $112 a barrel during October as traders try to assess when the war involving Iran will allow global energy supplies to return to normal.
Investors are worried that the conflict involving Iran could disrupt energy supplies and prevent the global oil industry from returning to normal. The rise in oil prices adds to concerns about costs for businesses and the wider economy. The combination of falling technology shares and rising oil prices weighed on stock markets worldwide, according to AP.
French stocks fall as debt worries grow
France's CAC 40 index fell 1%, recording one of the sharper declines among European stock markets. The index has fewer technology stocks than US and Asian markets, but it came under pressure as French government bond yields rose again. Investors are worried about France's large government debt and strained budget.
Violent protests across France have increased pressure on the government to spend more money. Additional spending could make the country's debt problem worse, adding to investor concerns about the government's finances and pushing up the yields demanded by investors holding French government bonds.
US bond yields fall as investors seek safety
Concerns about high government debt are affecting many developed economies, including the United States. In the US, high inflation, signs of a strong economy and other economic pressures have helped push government bond yields to levels not seen in decades, according to AP.
Despite the wider concerns about US debt, Treasury yields fell on Thursday as investors moved towards US government bonds. The move suggested that some investors were looking for safer places to put their money while AI stocks and other technology shares were falling.
The yield on the 10-year US Treasury fell to 5.01% on Thursday, down from 5.13% late Wednesday and more than 5.30% earlier in October. The fall was a notable move in the bond market. However, the yield remained well above its 3.97% level before the war involving Iran, according to AP.
US jobs data points to a strong economy
A separate report showed that fewer US workers applied for unemployment benefits last week. This suggests that layoffs may remain low across the country and that the US job market could be holding up better than economists expected.
The US economy has remained strong enough to help many companies increase their profits. Better earnings helped push the US stock market to a record high earlier in October, despite concerns about inflation, government debt and the war involving Iran.
Although the S&P 500 declined on Thursday, most of the stocks within the index actually rose. Gains in several companies were not enough to offset the losses in major technology stocks, which have a greater influence on the index because of their large market values.
P&G shares jump 5.8% after strong results
Procter & Gamble (P&G), the company behind brands such as Crest, Olay and Oral-B, was among the businesses that reported better-than-expected summer-quarter profits. Its shares rose 5.8% on Thursday, helping limit the broader market's losses.
P&G CEO Shailesh Jejurikar said the company expects geopolitical and economic challenges to continue. However, the company kept its forecasts for full-year revenue growth, profit growth and other financial measures unchanged, according to AP.
Defence company Lockheed Martin and transport company CSX were among the other businesses that joined the list of companies reporting summer-quarter profits above analysts' expectations. Gains in these companies, along with P&G, helped support parts of the stock market as technology shares fell.
Thursday's market movement showed the difference between technology stocks facing high spending costs and valuation concerns, and other businesses reporting strong profits. While a relatively strong US economy has supported company earnings, rising oil prices, fears about the Iran war, government debt and uncertainty over AI spending have kept investors cautious, according to AP.
