Nasdaq sinks as AI spending worries rattle global markets

The Nasdaq plunged Thursday as investors questioned whether the vast sums being spent on artificial intelligence will pay off. Rising oil prices, fueled by worries about the war with Iran, added pressure to markets around the world.

The Nasdaq Composite fell 694 points, or 2.6%, to close at 26,008.86 after dropping more than 750 points shortly before the close. The S&P 500 lost 93.74 points, or 1.2%, to 7,663.43, its worst day since July. The Dow Jones Industrial Average edged up 11.89 points, less than 0.1%, to 52,867.98.

The losses were concentrated in large technology companies. According to The Guardian, two-thirds of stocks in the S&P 500 rose, but declines among its most influential tech stocks pulled the index lower. Nvidia, the biggest U.S. company by market value, dropped 4.4% and was the largest drag on the index.

Investors have grown uneasy about the cost of building data centers and buying AI chips, and about the debt companies are taking on to finance that work. They are also reassessing stock prices that have climbed during the AI boom, even as companies in the industry continue to report growth.

“AI growth is dependent on capex (this is one of the most capital-intensive industries ever),” Adam Crisafulli, head of Vital Knowledge, said in a research note cited by CBS News. With capital spending far outpacing operating cash flow, he said, companies depend on stock and bond investors to fund it — and those markets have become “increasingly less accommodating.”

CBS News reported that the Brookings Institution estimates AI infrastructure development will cost more than $10 trillion from 2025 through 2032. Carl Weinberg, chief economist at High Frequency Economics, said that would dwarf investment in the 19th-century railroads and the dot-com boom.

Quarterly results offered little protection for AI-related shares. Meta Platforms fell 7% despite revenue that beat analysts’ expectations; profit fell short. The Guardian reported that Meta, which is pushing its Muse AI agent, also plans a new class of stock to raise money for AI investments and other expenses. Semiconductor equipment supplier Lam Research dropped 11.8% despite stronger-than-expected summer profit and revenue, while cloud computing company CoreWeave fell 10.1% amid concerns about its debt. Tesla slid 3.1% after profit beat forecasts but revenue missed them.

The sell-off began in Asia. South Korea’s Kospi fell 3.5%, Hong Kong’s Hang Seng lost 3% and Japan’s Nikkei 225 declined 2.7%. France’s CAC 40 dropped 1.4%, also hurt by rising French government bond yields, The Guardian reported.

Oil rose as uncertainty about the war with Iran weighed on investors. Brent crude reached $113.17 a barrel, up about 4%, after touching its highest level in five months, according to The Guardian. CBS News reported that U.S. benchmark West Texas Intermediate was trading at $99.21 a barrel, up 2.1%.

U.S. Treasury yields fell as investors bought government bonds. The 10-year yield dropped to 4.97% from 5.13% late Wednesday, The Guardian reported. Gains for Procter & Gamble, Lockheed Martin and CSX helped limit the broader market’s losses; Procter & Gamble rose 5.6% after standing by its full-year forecasts.