US stocks declined Wednesday after a stronger-than-anticipated inflation report, with the Nasdaq taking the biggest hit due to weakness in leading artificial intelligence stocks. The consumer price index rose 3.7 percent year-over-year in September, up from August's 3.4 percent, sparking concerns about the Federal Reserve's interest rate policy.
eToro analyst Bret Kenwell noted that the inflation data was higher than expected, potentially pushing traders to reassess the likelihood of a Fed rate hike later this month. The Nasdaq dropped nearly two percent, while the Dow and S&P 500 also fell.
Analysts linked the decline in AI-related stocks to rising borrowing costs. Angelo Kourkafas of Edward Jones highlighted that the higher-for-longer rate environment was increasing the cost of building AI infrastructure. Data center operator CoreWeave lost over 15 percent, and chip companies Nvidia and AMD also fell sharply.
In Europe, markets in London, Paris, and Frankfurt ended higher, recovering from earlier tech losses in Asia. Meanwhile, Asian markets struggled, with Tokyo and Seoul closing lower again. Investors were unmoved by strong Chinese export data, with Hong Kong and Shanghai also falling.
Tech firms had faced significant losses on Tuesday amid concerns about China's AI chip development and comments from Broadcom's CEO comparing the AI buying frenzy to gambling. However, Dutch chipmaking equipment giant ASML reported record sales and strong profits, with shares rising 1.7 percent.
Other notable movers included Lufthansa, which dropped 2.2 percent after being chosen to take a 44.9 percent stake in TAP for 1.03 billion euros. Bank of America finished down 4.8 percent after being fined $1.2 billion for violating anti-money laundering laws.