AI jitters, higher oil prices rattle US markets

US markets suffered a sharp decline on Friday, with AI-focused technology stocks facing renewed pressure. The Nasdaq, S&P 500, and Dow Jones Industrial Average all ended the day with significant losses. CoreWeave, Broadcom, and other AI-related tech companies saw their stocks drop further on concerns about their ability to turn a profit and repay debts.

This, coupled with a jump in oil prices due to Middle East supply worries, caused traders to become more cautious as the weekend approached. Rob Haworth, a senior investment strategist at US Bank Wealth Management, described the market as "feeling some fear," noting that high oil prices tend to negatively impact stock valuations.

The AI sector's financing woes were highlighted by Anthropic's upcoming IPO, where some current and prospective investors are considering a lower valuation. Analysts are projecting strong earnings for the third quarter, with a 30 percent increase expected, mainly driven by AI-related megacaps. However, the S&P 500's 12 percent gain in 2025 was largely due to AI stocks.

Inflation reports this week indicated that price pressures were extending beyond energy commodities. Federal Reserve Chair Kevin Warsh remained optimistic about the US economy's strength and global resilience despite an ongoing energy shock and tighter monetary policy. Currently, markets are expecting the Fed to maintain interest rates unchanged for the month.

Barclays expects 25-basis-point hikes in December and January. Tesla experienced a drop after unveiling a redesigned Roadster with rocket-style thrusters developed in collaboration with SpaceX.