Global markets faced a downturn on Thursday as artificial-intelligence stocks led the decline, while oil prices surged to their highest levels since May amid escalating concerns over the war with Iran. The S&P 500 dropped 0.8%, with the Nasdaq composite falling 1.5% by 10 a.m. Eastern time. The Dow Jones Industrial Average fared slightly better, down just 0.1%. The sell-off in AI stocks was driven by worries about rising borrowing costs for data centers and AI chips, as well as fears that the sector's rapid growth may have led to overvaluation.
Lam Research, a key player in semiconductor manufacturing, reported stronger-than-expected profit and revenue gains for the summer, yet its stock plummeted 7.7%. The company's forecast for the final quarter of 2026 also fell short of analyst expectations. Other major tech stocks saw mixed reactions to their earnings reports. Meta Platforms, which is advancing its Muse AI agent, lost 5.8% despite reporting higher revenue than anticipated. Tesla, however, erased early losses to rise 0.3% after posting a stronger profit than expected, though its revenue missed forecasts.
The global impact of the AI stock decline was evident in Asia, where South Korea’s Kospi tumbled 3.5%, Hong Kong’s Hang Seng dropped 3%, and Japan’s Nikkei 225 sank 2.7%. Oil prices also contributed to the market's volatility, with Brent crude rising 2.6% to US$111.66. In Europe, France’s CAC 40 fell 1%, exacerbated by rising yields on French government bonds due to concerns over the country’s debt and budget strains.
Despite the market turbulence, U.S. Treasury yields fell, signaling investor interest in safer assets. The yield on the 10-year Treasury dropped to 5.03% from 5.13% late Wednesday. Meanwhile, a report indicating fewer U.S. workers applied for unemployment benefits last week suggested a robust economy, which has helped U.S. companies achieve record profits. Procter & Gamble, Lockheed Martin, and CSX were among the companies that exceeded profit expectations, with Procter & Gamble’s stock rising 5.4%. CEO Shailesh Jejurikar acknowledged ongoing geopolitical and economic challenges but reaffirmed the company’s growth forecasts.