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More Drops for Nvidia and AI Stocks 11/05 09:34
More drops for AI chip stocks are dragging the U.S. market lower on
Thursday, even as much of Wall Street rises following strong profit reports
from AppLovin, Tapestry and other companies.
NEW YORK (AP) -- More drops for AI chip stocks are dragging the U.S. market
lower on Thursday, even as much of Wall Street rises following strong profit
reports from AppLovin, Tapestry and other companies.
The S&P 500 fell 2% and erased its rally from the day before, which was its
best in three months. The Dow Jones Industrial Average was down 502 points, or
0.9%, as of 10:10 a.m. Eastern time, and the Nasdaq composite was 3.6% lower.
Stock markets worldwide felt pressure from continued drops for companies in
the artificial-intelligence industry, and South Korea's Kospi index tumbled
5.3%. Such stocks have been swinging for months on worries that the build out
of further AI data centers may slow because of how expensive it's become to
borrow money.
Tuesday's U.S. midterm elections added another challenge. The nationwide
victories by Democrats raised the possibility that governments could force
pauses in construction of more data centers.
Nvidia fell 6.3% and was by far the heaviest weight on the S&P 500, a day
after dropping 3.2%. Advanced Micro Devices tumbled 13.1%. CoreWeave, a company
that rents access to AI chips to customers over the cloud, fell 10%.
Such stocks are among the most influential on Wall Street because they've
become some of the largest. A 1% move for Nvidia, for example, has more effect
on the S&P 500 than almost every other U.S. stock because it's the
second-largest by total value.
That allowed the drops for AI chip stocks to drown out gains for much of the
rest of the S&P 500, where a slight majority of the stocks actually rose.
AppLovin soared 31.8% after the marketing platform reported both revenue and
profit that topped analysts' expectations. It also approved a program to send
up to $3.2 billion to its investors by buying back its own stock, bringing the
program's total potential value to $3.6 billion.
Tapestry rallied 8.3% after the company behind the Coach and Kate Spade
brands likewise delivered a stronger profit than expected. It also raised its
forecasts for revenue and earnings this fiscal year.
Stock prices tend to follow where corporate profits and interest rates go
over the long term, depending on them much more than on who controls what in
Washington.
In other financial markets, the initial knee-jerk reaction to the midterm
results faded. The price of a barrel of Brent crude oil rose 2.5% to $96.95 and
recovered a chunk of its nearly 9% drop from the day before. Uncertainty still
reigns about what will happen in the war with Iran and when the global energy
industry can return to normal.
In the bond market, Treasury yields continued to ease. The yield on the
10-year Treasury fell to 4.86% from 4.90% late Wednesday. It had been at 4.95%
on election night and above 5.30% last month.
The drop came despite some encouraging reports on the U.S. economy. Fewer
U.S. workers applied for unemployment benefits last week. A separate report,
meanwhile, suggested overall productivity for U.S. workers improved by more
during the summer than economists expected. That could help the economy grow
without adding pressure to the nation's high inflation.
In stock markets abroad, indexes were mixed in Europe and Asia. Besides
South Korea, Japan's Nikkei 225 also felt the sting of drops for tech and
AI-related stocks, falling 1.8%.
London's FTSE 100 rose 0.4% after the Bank of England increased its main
interest rate for the first time in three years to help limit high inflation.
The bank said its next moves on interest rates largely hinge on what happens
with the Iran war, which sent oil prices and inflation higher worldwide.
"We've seen encouraging news in the past 48 hours," Bank Gov. Andrew Bailey
said at a press briefing. "The best thing that can happen is to resolve the
conflict in the Middle East; there's no question about it."
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