Wall Street Slips as Oil Prices Rebound and Investors Grow Wary of Inflation and AI Stock Frenzy

BY EMMANUEL OGBONNA

U.S. stocks drifted lower on Thursday as rising oil prices, persistent inflation concerns and uneven economic data weighed on investor sentiment, while enthusiasm surrounding the artificial intelligence boom continued to cool despite another blockbuster earnings report from chip giant Nvidia.

The S&P 500 slipped 0.3% in morning trading, putting the benchmark index on course for its fourth decline in the last five sessions after recently reaching a record high. The Dow Jones Industrial Average edged up by 37 points, or 0.1%, while the tech-heavy Nasdaq Composite fell 0.6% as major technology shares lost momentum.

Markets have recently struggled to sustain the powerful rally driven by artificial intelligence optimism that propelled technology stocks higher for much of the past year. Investors are increasingly questioning whether valuations across the AI sector have become overheated after enormous gains fueled by expectations of massive spending on AI infrastructure and data centers.

Even another strong earnings performance from Nvidia failed to reignite the market’s enthusiasm. The company once again exceeded Wall Street expectations for both profit and revenue during its latest quarter and projected current-quarter sales above analysts’ forecasts.

Chief Executive Jensen Huang said demand for AI-related infrastructure continues accelerating rapidly, describing the expansion of artificial intelligence systems as the “largest infrastructure expansion in human history.”

Despite the upbeat outlook, Nvidia shares swung between gains and losses before falling 1.9% as investors appeared reluctant to push the stock significantly higher after its enormous rally over the past year. Nvidia’s stock had surged nearly 70% during the previous 12 months, dramatically outperforming the broader market.

Analysts said the subdued market reaction reflected growing caution among investors who have already enjoyed massive profits from AI-related companies and are increasingly worried that expectations for future growth may have become too optimistic.

Some market observers have also raised concerns about the increasingly interconnected nature of the AI industry. Nvidia has invested in several companies that rely heavily on its chips and software, leading some critics to argue that portions of the AI ecosystem have become overly dependent on a relatively small group of firms fueling each other’s valuations and revenues.

Broader market pressure intensified as oil prices rebounded sharply amid continuing uncertainty surrounding the conflict involving Iran and the disruption of global energy supplies.

The price of Brent crude oil climbed 2.1% to $107.26 per barrel, recovering part of its losses from earlier in the week. Oil markets have experienced extreme volatility in recent weeks as traders attempt to gauge how long the conflict will continue disrupting shipments through the Strait of Hormuz, one of the world’s most strategically important oil transit routes.

The ongoing closure of the Strait has prevented large numbers of oil tankers from exiting the Persian Gulf, fueling fears of prolonged supply shortages and sustained increases in global fuel prices.

Rising oil prices have contributed to renewed selling pressure in the bond market, pushing Treasury yields higher once again. The yield on the benchmark 10-year U.S. Treasury note rose to 4.60% from 4.57% late Wednesday after briefly approaching 4.63% earlier in the day.

Higher Treasury yields have become a major concern for investors globally because they increase borrowing costs for businesses and consumers while reducing the appeal of riskier assets such as stocks. Elevated yields also push mortgage rates higher and can discourage companies from financing large-scale projects.

That concern is particularly significant for the artificial intelligence sector, where companies are spending enormous sums building data centers and expanding computing infrastructure. Analysts warn that persistently high borrowing costs could slow investment in AI projects that have become a key driver of recent economic growth in the United States.

Earlier Thursday, Treasury yields initially surged after new labor market data showed the U.S. economy remains more resilient than many economists expected. Government figures revealed that applications for unemployment benefits unexpectedly declined last week, signaling that layoffs remain relatively limited despite economic uncertainty.

However, bond yields later eased slightly after fresh business activity data painted a more mixed picture of the economy.

Preliminary survey data from S&P Global showed weaker-than-expected growth among U.S. services companies, although manufacturing activity improved modestly. Businesses surveyed reported increasing pressure from rising costs and slowing customer demand as inflation accelerates.

Chris Williamson said the economic impact of the Middle East conflict was becoming increasingly visible in corporate activity and business sentiment.

Economists say inflationary pressures are no longer being driven solely by oil prices. Broader price increases across goods and services, combined with weakening consumer confidence, are raising concerns that the U.S. economy could face slower growth alongside persistent inflation — a scenario that complicates policymaking for the Federal Reserve.

Recent consumer surveys have shown growing pessimism among American households regarding the economy, with many consumers increasingly worried about rising living costs, fuel prices and financial uncertainty.

Among individual companies, shares of Walmart fell 6.8% after the retail giant released its latest earnings report. Although Walmart reported another strong quarter for revenue, investors were disappointed by weaker-than-expected profit forecasts for upcoming quarters, raising concerns about consumer spending trends and higher operating costs.

In contrast, Ralph Lauren surged 10.5% after reporting stronger-than-expected profit and revenue results, helped by resilient demand for premium apparel and accessories.

International markets delivered mixed performances. In Europe, major indexes fluctuated modestly as investors reacted to global inflation concerns and energy market volatility.

Asian markets experienced larger swings. KOSPI soared 8.4%, driven by strong gains in technology stocks. Samsung Electronics jumped 8.5% after management reached a late agreement with labor unions that avoided a potentially costly strike.

Meanwhile, chipmaker SK Hynix surged 11.2% amid optimism tied to its partnership with Nvidia and continued strong demand for advanced memory chips used in artificial intelligence systems.

Japan’s Nikkei 225 climbed 3.1%, while markets in Hong Kong and Shanghai weakened sharply, with indexes falling 1% and 2% respectively as investors remained cautious about China’s economic outlook and global trade uncertainty.