The S&P 500, Nasdaq and Dow all closed sharply lower Wednesday as investors pulled back from high-flying artificial intelligence stocks and oil prices rose on renewed Iran tensions.
By yourNEWS Media Newsroom
U.S. stocks fell sharply Wednesday as a widening selloff in artificial intelligence shares dragged major indexes lower and renewed concerns over Iran pushed oil prices higher.
The Dow Jones Industrial Average dropped 953 points, or 1.9%, while the Nasdaq composite fell 509 points, or 2%. The S&P 500 declined 1.6% after briefly posting a modest gain earlier in the session. The benchmark index recorded its first back-to-back decline in three weeks.
The losses marked another difficult session for AI-linked stocks, which had helped drive Wall Street to record highs before suddenly reversing course last week. Investors are now weighing whether the pullback has removed some of the excess optimism surrounding the sector or whether it signals the beginning of a longer downturn.
Concerns have grown that some AI stocks rose too far and too quickly during the market’s artificial intelligence boom.
Super Micro Computer, which sells AI servers, posted one of the day’s steepest drops. Shares plunged 23.1% after the company said late Tuesday that it plans to raise $7 billion by selling common stock and convertible preferred stock.
Such offerings can raise large amounts of capital when stock prices are high, but they can also dilute the ownership stakes of existing shareholders.
Micron Technology also remained volatile. The computer memory maker swung from an early loss of nearly 4% to a modest gain before closing down 4.7%. The move followed a turbulent stretch in which Micron dropped 7.7% last Thursday, fell another 13.3% Friday and then rallied 9.9% Monday. Despite the recent swings, Micron remains up 212.6% for the year.
Semiconductor-related companies initially helped support the S&P 500 during morning trading but lost momentum later in the day. KLA, for example, gave up nearly all of an early 7.7% gain and ended up just 0.1%.
Nvidia was the heaviest drag on the S&P 500. The chipmaker, whose market value has grown to nearly $4.9 trillion because of demand tied to AI, fell 3.4%.
Some selling pressure may also be tied to investors raising cash ahead of anticipated high-profile stock market debuts by several AI-related companies. SpaceX’s initial public offering could happen later this week.
Treasury yields were mostly steady after the latest U.S. inflation report came in close to expectations. The Consumer Price Index rose to 4.2%, the highest inflation rate in three years, but the headline figure matched economist forecasts.
An important underlying measure of inflation rose less than economists had expected from April to May.
The 10-year Treasury yield edged up to 4.54% from 4.53% late Tuesday. The two-year yield, which more closely reflects expectations for Federal Reserve interest rate policy, dipped to 4.12% from 4.13%.
Traders have recently increased bets that the Federal Reserve may raise its benchmark interest rate at least once this year because inflation remains elevated and the U.S. labor market continues to show strength. Wednesday’s inflation data caused investors to slightly reduce those expectations, according to CME Group data.
High Treasury yields can slow economic activity and pressure prices for stocks, cryptocurrencies and other investments. They can be especially difficult for stocks viewed as expensive, a category critics say includes many AI names after their sharp runup.
Oil prices added another source of uncertainty. Crude prices have been moving with expectations over whether the United States and Iran can reach an agreement to reopen the Strait of Hormuz to oil tankers.
Brent crude rose 1.8% to $93.10 a barrel after President Donald Trump warned Iran would “pay the price” for stalled negotiations related to the conflict.
International markets were also under pressure. European indexes were mixed, while Asian markets posted sharper declines.
South Korea’s Kospi dropped 4.5%, weighed down by losses for technology giants Samsung Electronics and SK Hynix.
Japan’s Nikkei 225 fell 1.9% after data showed the country’s producer price index, a measure of wholesale-level prices, rose in May at the fastest pace in more than three years.
SoftBank Group, the technology and telecommunications company with a major AI focus, lost 8.3%.
The latest market decline shows investors are becoming more cautious after a powerful AI-led rally, with high valuations, interest rate uncertainty and geopolitical risks now testing Wall Street’s appetite for risk.
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