AI Stocks Drag Global Markets Lower as Oil Hits Five-Month High

The Nasdaq composite tumbled 694.00 points, or 2.6%, to 26,008.86 on Thursday — its worst session in a months-long AI selloff — while Brent crude leaped 4% to $113.17 a barrel, its highest level in five months. The S&P 500 fell 93.74 points, or 1.2%, to 7,663.43, its worst day since July. The Dow Jones Industrial Average eked out a gain of 11.89 points, less than 0.1%, to close at 52,867.98.

The damage concentrated in a handful of names. And here's the odd part: two out of every three stocks in the S&P 500 actually rose. Tech just swamped them.

Why did AI stocks fall so hard?

Investors are worried on two fronts. First, borrowing money to build datacenters and buy AI chips has become expensive. Second, prices shot too high during a years-long frenzy, even though companies in the industry keep reporting growth.

Nvidia, the largest company on Wall Street by total value, fell 4.4%. Because of its size, it carried more weight on the S&P 500 than any other stock and was the single strongest force pulling the index lower.

CoreWeave, which borrowed money to buy Nvidia's AI chips and rents them out over the cloud, dropped 10.1%. Its stock has been particularly shaky in recent weeks on worries about its debt.

The selloff hit even companies that beat expectations:

• Lam Research reported summer profit and revenue slightly stronger than analysts expected — and still tumbled 11.8%.
• Meta Platforms lost 7% after posting stronger revenue than forecast, though profit fell short. The company behind Facebook and Instagram shed tens of billions in market value and said it was creating a new class of stock to raise money for AI investments and other expenses. Meta is pushing its Muse AI agent.
• Tesla fell 3.1% despite reporting a stronger summer profit than analysts expected; its revenue came in weaker than forecast.

Good numbers no longer buy protection. That's the message Thursday's tape sent.

How far did the selloff spread?

The weakness began in Asia, where indexes are packed with AI-industry players. South Korea's Kospi tumbled 3.5%, Hong Kong's Hang Seng dropped 3%, and Japan's Nikkei 225 sank 2.7%.

In Europe, France's CAC 40 fell 1.4% — one of the continent's sharpest losses. France has fewer tech stocks than Asian or US indexes, but another jump in French government bond yields did the damage. Yields there have been climbing on worries about the government's big debt load and strained budget, and violent protests across France have raised pressure to increase spending, which could add further to debt.

Oil added its own pressure. Brent crude jumped 4% to $113.17 after touching its highest level in five months, shooting up from less than $97 at the start of the month on uncertainty about when the war with Iran will let the global energy industry return to normal.

What did bonds and the broader economy do?

US bond yields fell sharply as investors bought Treasurys in search of safety. The 10-year Treasury yield tumbled to 4.97% from 5.13% late Wednesday — and from more than 5.30% earlier this month. That's a major move for the bond market.

The drop came even as a report showed fewer US workers applied for unemployment benefits last week, a signal that layoffs remain low. Worries about big government debt, high inflation and a still-strong US economy had pushed US yields to their highest levels in decades before Thursday's reversal.

That solid economy has helped US companies broadly make bigger profits — what propelled the US stock market to a record high earlier this month despite the many worries tugging at it.

Which stocks pushed back?

Procter & Gamble, Lockheed Martin and CSX joined the list of companies topping summer profit expectations, and their gains limited the market's losses. Procter & Gamble, the company behind Crest, Olay and Oral-B, rose 5.6%.

CEO Shailesh Jejurikar said Procter & Gamble expected "geopolitical and economic challenges" to continue, but it stood by its forecasts for growth in revenue, profit and other measures for the full year.

The takeaway: on Thursday, the AI trade set the price for everything else. Whether Nvidia and its borrowers can stabilize will decide if this was a shudder — or the start of a repricing.