Wall Street Slides as AI Fears, Inflation Shock and Oil Surge Rattle Markets

BY Rosemary

U.S. stocks fell sharply Friday as investors resumed a broad sell-off in companies perceived to be vulnerable to disruption from artificial intelligence, while a hotter-than-expected inflation report and rising oil prices added fresh pressure to financial markets.

The S&P 500 dropped 0.7% in morning trading, putting the benchmark index on track for what would be only its second losing month in the past 10. The Dow Jones Industrial Average slid 680 points, or 1.4%, as of 10:15 a.m. Eastern time, while the Nasdaq composite declined 0.8%, weighed down by technology shares.

The latest pullback reflects mounting anxiety that AI-powered tools may fundamentally reshape corporate America, potentially rendering some business models obsolete and compressing profit margins across wide swaths of the economy. Investors have increasingly targeted software firms and service-oriented companies whose functions could be automated or displaced by rapidly advancing AI systems.

One of the day’s most striking corporate announcements came from Block, the financial technology company led by Jack Dorsey. The firm, which operates Cash App and Square, revealed it would cut nearly half its workforce — more than 4,000 jobs — despite reporting growing profits and expanding share buybacks.

Dorsey said advances in AI-driven productivity tools were transforming the way companies operate. “Intelligence tools have changed what it means to build and run a company,” he wrote in a letter to shareholders, adding that smaller teams equipped with powerful software can accomplish more with greater efficiency.

While Block’s shares surged 17.5% on the restructuring news, investors interpreted the move as a stark signal that AI could lead not only to workforce reductions but also to sweeping structural shifts across industries. Dorsey suggested many companies are lagging in recognizing how quickly AI could force similar changes.

The ripple effects were evident across the software sector. Salesforce, whose customer relationship management platform is widely used by corporations, fell 4%, erasing gains from the prior session despite reporting stronger-than-expected earnings. A widely tracked exchange-traded fund representing the software industry dropped 2.5%, deepening its losses for the year to nearly 24%.

Concerns have extended beyond publicly traded firms to private-equity lenders that finance technology companies. Blue Owl Capital declined 4.3%, reflecting worries that software borrowers facing AI-driven disruption could struggle to maintain growth and service debt obligations.

Even companies at the forefront of the AI boom were not immune. Shares of Nvidia fell 1.7%, adding to a steep decline from the previous day that marked the stock’s worst loss since last spring. The chipmaker had posted earnings above analysts’ expectations and forecast continued revenue growth, yet investors remain uneasy about whether the torrid pace of spending on AI infrastructure can be sustained.

Rival semiconductor companies posted similar losses as traders questioned whether tech giants such as Amazon and Alphabet will generate sufficient long-term returns to justify the billions of dollars being poured into AI development and data centers.

Beyond the technology sector, energy markets injected additional volatility. The price of U.S. benchmark crude oil climbed 2.8% to $67.04 per barrel, while Brent crude, the international standard, rose 2.7% to $72.73. The gains reflected growing concern over escalating tensions between the United States and Iran surrounding Tehran’s nuclear program.

The U.S. military has reportedly increased its presence in the Middle East, assembling aircraft and naval assets in the region. Market participants fear that any escalation could disrupt global oil supplies and drive energy prices higher, complicating the inflation outlook.

Inflation concerns intensified following a report showing that wholesale prices in the United States rose 2.9% last month, significantly above economists’ expectations of 1.6%. The stronger-than-anticipated reading rattled investors who had been hoping for continued progress toward cooling price pressures.

A higher inflation trajectory could influence the Federal Reserve’s interest-rate policy. Markets have been anticipating eventual rate cuts to support economic growth, but persistent inflation may prompt policymakers to delay easing measures. While lower interest rates typically support equity valuations and borrowing, they also risk reigniting inflation if implemented prematurely.

In the bond market, the yield on the 10-year U.S. Treasury note edged up to 3.98% after briefly moving higher in response to the inflation data. The yield remained slightly below its 4.02% level late Thursday, reflecting ongoing uncertainty about the path of monetary policy.

Amid the broader turbulence, select stocks bucked the downward trend. Netflix jumped 8.8% after abandoning its bid to acquire Warner Bros. Discovery’s studio and streaming assets. The development opened the door for Skydance-owned Paramount to pursue a deal involving its Hollywood rival. Shares of Paramount Skydance rose 7.6%, while Warner Bros. Discovery slipped 2%.

Overseas markets offered a mixed picture. In Asia, South Korea’s Kospi retreated 1% from a recent record high, while Hong Kong’s Hang Seng gained 0.9%. European indexes were uneven as investors weighed similar concerns about inflation, AI-driven disruption and geopolitical risk.

Taken together, Friday’s market action underscored the fragile balance facing investors: a transformative technological shift reshaping corporate strategies, persistent inflation complicating monetary policy, and geopolitical tensions threatening energy markets. With multiple forces converging at once, volatility appears likely to remain a defining feature of global financial markets in the weeks ahead.