Sharp drops for AI stocks overwhelm markets worldwide as oil prices jump

On Thursday, sharp declines in AI stocks dragged global markets lower as oil prices reached their highest levels since May due to concerns over the Iran conflict. The S&P 500 dropped 1.2%, the worst day since July, while the Nasdaq composite sank 2.6%. Despite the tech sector's weakness, most other US stocks managed to rise, leading to a positive performance for the Dow Jones Industrial Average, which only added 11 points.

AI-related stocks were particularly volatile due to fears that their growth may be threatened by rising costs for datacenter construction and AI chips. Companies like Lam Research and Nvidia suffered significant losses, with Lam Research tumbling 11.8% and Nvidia falling 4.4%. Other tech giants, including Meta Platforms and Tesla, also posted declines despite reporting stronger-than-expected earnings.

Oil prices surged 4%, reaching $113.17 per barrel, following a five-month high, driven by uncertainty about the ongoing Iran conflict's impact on the global energy industry. European markets, particularly France's CAC 40, faced sharp declines, partly due to rising yields on French government bonds caused by concerns about the country's large debt and budget struggles.

Meanwhile, US bond yields dropped sharply, suggesting investors sought safety in government bonds amid worries of big government debt and high inflation. Despite these headwinds, two-thirds of S&P 500 stocks still rose on Thursday, with several companies reporting better-than-expected earnings. Procter & Gamble, for example, stood by its growth forecasts for the year despite geopolitical and economic challenges.