Wall Street slides; fears of AI bubble and inflation send investors away
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Traders working on the floor of the New York Stock Exchange, in New York City, on Dec 12.
PHOTO: REUTERS
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NEW YORK - Wall Street’s major indexes closed lower on Dec 12, and investors left technology for other sectors as Broadcom and Oracle fuelled concerns about an AI bubble and rising US Treasury yields added pressure after some policymakers spoke out against easing monetary policy.
Treasury yields rose after a group of Federal Reserve officials who voted against the central bank’s interest rate cut this week voiced worries that inflation remains too high to warrant lower borrowing costs.
Broadcom shares tumbled after the chipmaker warned of slimmer future margins, causing renewed concerns about the profitability of surging AI investments. This was after a nearly 11 per cent sell-off in Oracle on Dec 11 following the cloud software company’s weak financial forecast.
Oracle shares added to losses on Dec 12 even after it denied a Bloomberg report that its data centres for ChatGPT maker OpenAI were being delayed.
It didn’t help that the S&P 500 and the Dow had notched record closing highs on Dec 11 and that investors were looking ahead to important labour market and inflation data due out in the week ahead, according to Mr Anthony Saglimbene, chief market strategist at Ameriprise.
“It’s not surprising that the market’s selling off today after a pretty solid couple weeks,” said Mr Saglimbene, adding that following record closes, and with “some disruption in the AI theme right now, investors today are looking at some of the more defensive sectors.”
The Labour Department’s reports on nonfarm payrolls, consumer inflation and retail sales data are due next week and may offer greater insight into the economy’s health after the October government shutdown starved investors and policymakers of official data releases.
“The market is probably a little bit cautious on heading into those big numbers next week,” said the strategist.
According to preliminary data, the S&P 500 lost 73.62 points, or 1.06 per cent, to end at 6,827.38 points, while the Nasdaq Composite lost 398.69 points, or 1.69 per cent, to 23,193.65.
The Dow Jones Industrial Average fell 242.02 points, or 0.50 per cent, to 48,461.99.
Stocks in the broader chip market were under pressure with the Philadelphia semiconductor index falling sharply. And along with Broadcom, heavyweight AI leader Nvidia was a major drag on the S&P 500.
Other companies that have benefited from AI bets but went into reverse on Dec 12 included SanDisk and infrastructure companies such as CoreWeave and Oklo .
Most of the 11 S&P 500 industry sectors declined, led by heavyweight tech stocks. Defensive consumer staples led the advancers during the session.
On the bright side, Lululemon Athletica rallied sharply after the apparel maker raised its annual profit forecast and said that chief executive officer Calvin McDonald was leaving the company.
But Costco Wholesale shares lagged even after it beat Wall Street estimates for first-quarter revenue and profit as consumers snapped up affordable essentials and nice-to-have items at its stores ahead of the crucial holiday season. REUTERS
