Wall Street Slips as AI Stocks Decline

Wall Street experienced a decline on Tuesday as artificial intelligence (AI) stocks continued to fall. The S&P 500 dropped by 0.7%, marking its third consecutive modest loss since reaching an all-time high last Thursday. The Dow Jones Industrial Average fell by 116 points, or 0.2%, while the Nasdaq composite decreased by 1.3%.

The decline was primarily driven by stocks that have previously benefited from the AI technology boom. Over the summer, these stocks have fluctuated amidst concerns that their prices had surged too much during the AI hype. Doubts about the sustained demand for memory, processors, and other data center components are growing, as AI may not prove as profitable as initially expected.

Micron Technology saw a 7% decline and was one of the most significant burdens on the S&P 500, alongside chip companies Nvidia, which fell 2.3%, and Broadcom, which decreased by 3.2%. Despite recent fluctuations, these stocks have performed well overall, with Micron more than tripling in value this year. However, stocks deemed overly expensive face increased scrutiny when interest rates are high.

The yield on the 10-year U.S. Treasury slightly decreased to 4.70% from 4.72% late Monday, remaining significantly above the 3.97% level from before the conflict with Iran began. The 30-year Treasury yield also dropped but is still near its highest point since 2007. Yields have risen since the war began, mainly due to high oil prices driving inflation, along with concerns over substantial government debt and borrowing.

High oil prices have contributed to maintaining elevated yields, with Brent crude rising 0.2% to reach $91.02 per barrel. There is ongoing uncertainty regarding the potential U.S. and Iran deal, which could allow oil tankers to move freely from the Persian Gulf again. Brent was priced at $72.87 per barrel before the start of the conflict.

The increase in yields has already pushed the average long-term U.S. mortgage rate to its highest level in a year, negatively impacting the housing industry. A report indicated that homebuilders initiated fewer new houses last month than anticipated by economists. This data impacted Home Depot’s stock, which edged down by 0.1%, despite the company’s stronger-than-expected profit and revenue for the latest quarter. Home Depot’s CFO, Richard McPhail, noted that customers continued to focus on smaller projects.

Elevated yields could also hamper borrowing efforts by Big Tech companies for data center investments, posing a risk to one of the major growth drivers for the U.S. economy. In other Wall Street news, Klarna’s shares dropped 22.8%, despite the payments company reporting better-than-expected results for the latest quarter. The company reduced its financial forecasts for 2026, mainly due to expectations for Germany, its largest market by volume.

Meta Platforms experienced a 4.4% decline as opening statements began in a crucial trial in a California federal court. States are seeking billions of dollars in damages regarding social media’s effects on children.

Overall, the S&P 500 decreased by 53.30 points to 7,691.76, while the Dow Jones Industrial Average fell by 116.38 to 53,343.40, and the Nasdaq composite plummeted by 355.20 to 26,289.71. International stock markets showed mixed results, with Europe and Asia indexes fluctuating. South Korea’s Kospi fell by 1.5%, considered a modest movement, following swings of at least 2.4% in the previous three days. Seoul’s market, dominated by tech giants Samsung Electronics and SK Hynix, has experienced some of the most significant AI-driven swings globally.