AI Stocks Influence Global Stock Markets Amid Economic Uncertainties

Computer chipmakers and companies benefiting from the artificial intelligence growth are seeing a decline on Thursday, affecting stock markets globally. These movements overshadow other positive trends on Wall Street, leading to mixed results for U.S. stock indexes. The S&P 500 decreased by 0.2% after nearing its peak last month. Meanwhile, the Dow Jones Industrial Average rose by 102 points or 0.2% as of 11:45 a.m. Eastern, while the Nasdaq composite dropped 0.7%.

Despite this, the majority of Wall Street stocks rose following several major companies reporting better-than-expected quarterly profits. Abbott experienced a significant jump of 11.1% after surpassing profit expectations and increasing its earnings forecast for the complete year. UnitedHealth Group also rose by 3.5% due to positive results. However, Nvidia’s 2.5% fall had a pronounced effect on the S&P 500 because it is the largest company by value on Wall Street.

Other AI sector companies also experienced declines, partially reversing their substantial gains. Micron Technology saw a 5.7% fall, reducing its yearly gain below 200%. Despite a 10.6% fall, Sandisk remains up 500% for the year, and Western Digital is still 170% up despite a 9% drop.

These stock pressures have persisted for weeks, driven by concerns over their potentially inflated valuations and whether demand for computer memory and processors will hold if AI does not deliver the profits and productivity promised. Losses occurred even though Taiwan Semiconductor Manufacturing Co., a key figure in the chip sector, reported higher-than-expected quarterly profits. Its stock rose 1.2% in Taiwan, yet its U.S.-traded stock fell by 2.2%.

In South Korea, AI-heavy companies like Samsung Electronics and SK Hynix led the Kospi index to drop by 6.4%. This market has been volatile in recent weeks, with major swings, reflecting the dominant role of these companies. A recent rate hike from the Bank of Korea, its first since 2023, also weighed on Seoul’s stocks. Higher interest rates manage inflation but can restrain economic growth and investment values.

There is growing concern that the Federal Reserve and other central banks may need to increase rates to manage the impacts of rising oil prices. Oil prices have surged due to fears that conflict with Iran could hinder oil tanker routes in the Strait of Hormuz. Brent crude oil briefly exceeded $86 per barrel but fell to $84.75 later, marking a 0.2% decrease from the previous day.

The bond market saw the 10-year Treasury yield rise to 4.57% from 4.55%, escalating from 3.97% before Iran’s conflict began. Mixed U.S. economic reports further influenced the bond market. Though retail spending was lower than anticipated, excluding gas stations showed consumer spending resilience. Fewer workers filing for unemployment suggests a robust job market. Additionally, mid-Atlantic manufacturing exceeded expectations.

Globally, most European and Asian stock indexes witnessed declines, with drops of 1.8% in Shanghai and 2.8% in Tokyo. Hong Kong’s Hang Seng index was an exception, increasing by 1.3%. Alibaba’s increase followed China’s approval for the Apple Intelligence AI tool’s usage internally, with plans to integrate it with Alibaba’s Qwen model.