AI stocks resume their drops and drag markets lower worldwide

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NEW YORK — The roller-coaster ride for AI stocks is snapping lower again Tuesday and weighing on Wall Street.

The S&P 500 fell 0.3 per cent even though the majority of stocks within the index rose. The drops for stocks in the artificial-intelligence industry dragged the Nasdaq down 0.7 per cent, as of 12:45 p.m. Eastern time, while the Dow Jones Industrial Average was down 173 points, or 0.3 per cent.

The weakness began in Asia, where Samsung Electronics tumbled 6.9 per cent in Seoul. The tech giant gave a preliminary look at its performance for the second quarter, and the numbers were strong. Samsung Electronics said it expects to say its operating profit surged roughly 1,800 per cent from a year earlier.

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Analysts called the numbers surprisingly good, but they still weren’t enough for investors after its stock came into the day having well more than doubled in the year so far.

On Wall Street, AI stocks have been under similar pressure in recent weeks on worries that their prices shot too high and that AI may not produce enough productivity and profits to make all the investments in chips and data centers worth it.

Micron Technology fell 6.1 per cent and was the heaviest weight on the S&P 500. Intel sank 9.2 per cent and also weighed heavily on the market. Nvidia, which is the largest stock on Wall Street by value because of the AI boom, rose 0.9 per cent after slipping earlier in trading. That helped ease some pressure on the broader market.

SpaceX, which owns the xAI business, fell 5.2 per cent in its first trading after getting included in the Nasdaq 100 index.

Outside of tech, Vertex Pharmaceuticals fell 0.5 per cent after saying it agreed to buy Crinetics Pharmaceuticals for US$85 per share in cash. Crinetics, which develops therapeutics for endocrine diseases, soared 98.8 per cent.

Rivian Automotive dropped 14.5 per cent after the electric vehicle company said it’s selling 75 million shares of its stock, which dilutes the ownership stakes of earlier shareholders.

Stocks also felt pressure from a rise in oil prices after the British military said three tankers were struck by projectiles in the Strait of Hormuz. That hurt hopes that the war in Iran may be winding down and that the Strait of Hormuz may fully reopen to oil tankers carrying crude to customers worldwide from the Persian Gulf.

Brent crude, the international standard, rose 3 per cent to US$74.12.

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Higher oil prices put upward pressure on inflation, and Treasury yields climbed in the bond market. The yield on the 10-year Treasury rose to 4.52 per cent from 4.48 per cent

High yields worldwide have been rattling investors after oil prices burst above US$100 per barrel earlier in the summer because of the war. The worry is that high inflation may force the Federal Reserve and other central banks to hike interest rates. High rates can keep a lid on inflation, but they also slow the economy and hurt prices for all kinds of investments.

In stock markets abroad, South Korea’s Kospi tumbled 4.9 per cent because Samsung Electronics alone makes up more than a quarter of the index.

Japan’s Nikkei 225 fell 2.1 per cent, and Germany’s DAX lost 1.4 per cent for two of the world’s bigger moves.

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Stan Choe, The Associated Press

AP Business Writers Matt Ott and Elaine Kurtenbach contributed to this report.