Nvidia leads Wall Street slide as AI stocks correct

Wall Street endured its worst trading day in nearly a year on Thursday, driven by a sharp decline in shares linked to artificial intelligence infrastructure. The sell-off wiped out the market gains from the previous day, which had been the strongest in three months.

The S&P 500 closed down 4.4%, or 334.89 points, to finish at 7,353.73. The Dow Jones Industrial Average lost 1,833.06 points, a 3.4% drop, to close at 51,523.06. The Nasdaq composite, heavily weighted toward technology firms, fell 5.5%, or 1,421.52 points, to 24,315.00. This loss placed the Nasdaq 11.9% below its all-time high set last month, a decline market analysts define as a correction.

The pressure on AI stocks has built over several months as investors worried about the rising cost of borrowing money. Critics argued that stock prices for AI companies had risen too quickly, creating a bubble. Tuesday’s midterm elections added a new layer of concern for the sector. Democratic victories raised the possibility that future governments might pause the construction of new data centers. Voters from both political parties have expressed wariness about AI and have cited rising power bills caused by data center operations as a key issue.

Any slowdown in data center construction would likely reduce demand for AI chips, electricity, and other services that currently drive much of the U.S. economic growth. Nvidia, the chipmaker that has become the face of the AI boom, fell 9.3%. This drop made it the heaviest drag on the S&P 500. The company is now down 2.6% for the year, following annual gains of approximately 39%, 171%, and 239% in the previous three years. Advanced Micro Devices dropped 17.3%, while CoreWeave, a cloud computing provider for AI chips, fell 9.8%. GE Vernova, which supplies power for data centers, sank 7.5%.

The decline was broad across the market, as morning gains for most stocks quickly disappeared. A few winners stood out against the red backdrop. AppLovin jumped 31% after reporting revenue and profit that exceeded analyst expectations. The company’s board also approved a stock buyback program of up to $3.2 billion, bringing the total value of the program to $3.6 billion. Tapestry, the parent company of Coach and Kate Spade, rallied 7.1% after posting stronger profits than expected and raising its revenue and earnings forecasts for the current fiscal year.

International markets also reacted to the U.S. sell-off. South Korea’s Kospi index tumbled 5.3%, and Japan’s Nikkei 225 fell 1.8% as tech stocks dropped. In Europe, the FTSE 100 dipped 0.4% after the Bank of England raised its main interest rate for the first time in three years to combat inflation. Bank of England Governor Andrew Bailey said at a press briefing that resolving the conflict in the Middle East would be the best outcome for global stability.

Oil prices recovered from their previous day’s drop, with Brent crude rising 3.9% to $98.29 per barrel. In the bond market, yields continued to fall. The 10-year Treasury yield dropped to 4.84% from 4.90% late Wednesday. This decline occurred despite reports that fewer U.S. workers applied for unemployment benefits last week and that summer productivity improved more than economists had anticipated.