NEW YORK (AP) — Wall Street stabilizes Thursday after sharp declines in stocks around the world during the artificial intelligence the industry is concerned about how long the AI frenzy will last.
After initially suffering a loss as a result it’s the worst day since Julythe S&P 500 quickly erased it and added 0.1% to get closer to its record level settled last week.
Continued weakness in AI stocks led to a 0.4% decline in the Nasdaq Composite Index. But most of the rest of the U.S. stock market rose nonetheless, and the Dow Jones Industrial Average was up 463 points, or 0.9%, as of 2:17 p.m. Eastern Time.
The markets were much more fragile at the start of the day. The sell-off in AI stocks that began on Wall Street on Wednesday spread around the world and sent South Korea’s Kospi stock index down 7.6% and Japan’s Nikkei 225 down 4.9%.
AP AUDIO: Wall Street stabilizes after sharp declines in AI stocks around the world
Wall Street remains close to its records, even if heavy technology stocks fall again.
These are the latest developments in AI stocks after dominating the market for years. Businesses invest money in technology in hopes of making greater profits and improving productivity. But data centers and AI chips cost money, and many companies borrow money to get them.
Now after the returns bond markets around the world reached their highest levels in years and made borrow more expensive moneyConcerns are growing about the resilience of this spending boom. Many AI-related companies have already taken on debt to realize their aspirations, and stocks are struggling under the weight of debt.
CoreWeave, which offers AI computing power to its customers in the cloud, fell in early trading before rising 2%. It fell 15.5% a day earlier. It said this summer that it had $4.41 billion in principal payments due on its debt in the second half of this year and another $6.18 billion in 2027. It had more than $5.5 billion in liquidity as of June 30.
High yields in the bond market also generally make investors less willing to pay high prices for stocks, especially those considered more expensive.
Nvidia, the chip company that rode the AI boom to become Wall Street’s most valuable company, fell 1.9% and was the heaviest weight in the S&P 500. It began the day with a gain of nearly 1,415% since the end of 2022.
Losses in AI stocks eased as the day progressed, allowing broad U.S. indexes to stabilize. CoreWeave had fallen as much as 9.5% in the morning before erasing the loss and gaining ground, while non-AI stocks were much more resilient.
Marsh & McLennan helped lead the market after the insurance and professional services company reported higher summer profit than analysts expected. The company, which changed its brand name to Marsh earlier this year, also made more revenue than expected and its stock rose 4.9%.
Earnings expectations are high for all kinds of companies during this reporting season, which began in earnest this week. This is what has allowed US stocks to set records despite high inflation and many other concerns weighing on Wall Street. Now, companies will need to exceed these lofty expectations to drive their stock prices even higher.
Seven out of ten stocks in the S&P 500 rose. But because AI stocks have risen so much in value, their stock movements have more of an effect on the index and can drown out the rest of the market.
In the bond market, Treasury yields fell, meaning investors were willing to pay higher prices to buy U.S. government bonds. Treasuries have a reputation as a safer investment, with less risk of borrower bankruptcy, and investors often flock to them when they’re feeling nervous.
The 10-year Treasury yield fell to 5.08% from 5.19% Wednesday evening. It had topped 5.30% earlier this month and touched its highest level since 2002 on concerns about high inflation, signals of a strong U.S. economy and other factors.
The decline in yields occurred even though another report reported inflation has worsened in the United States, more than economists predicted.
Several reports on the U.S. economy have also been better than economists expected, which generally pushes yields higher. One report said American retailers made more money last month than economists expected, while another said fewer American workers applied for unemployment profits last week than expected.
In foreign stock markets, South Korea’s loss was the headliner. Its Kospi index is dominated by two chip companies, Samsung Electronics and SK Hynix, and it fell to its worst day since July. It has fallen 39% since setting a record in June.
Indexes were stronger in Europe, which is less reliant on technology stocks, and London’s FTSE 100 rose 1.1%, one of the biggest gains in the world.
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AP Business writers Chan Ho-him and Matt Ott contributed to this report.
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