AI sector slumps as oil prices rise amid geopolitical concerns

Global markets experienced a downturn on Thursday as AI stocks declined, dragging down the broader market. Oil prices reached a 5-month high, fueled by concerns over the ongoing conflict with Iran. The S&P 500 fell 1.3%, with the Nasdaq composite dropping 2.4% by 12:56 p.m. ET. The Dow Jones Industrial Average declined by a more modest 0.1%. AI stocks faced pressure due to rising borrowing costs for data centers and AI chips, as well as concerns over overvaluation. Lam Research, a semiconductor equipment provider, reported stronger-than-expected summer profits but saw its stock fall 11.1%. The company also issued a profit forecast below analyst expectations, despite a 52.4% year-to-date gain. Meta Platforms, which is developing its Muse AI agent, dropped 7.4% after reporting higher-than-expected revenue but missing profit targets. The company also announced a new stock class to fund AI investments. Other major tech firms faced volatility following mixed quarterly results. Meta’s announcement of a new stock class to fund AI initiatives added to market uncertainty. The broader market sentiment remained cautious as investors grappled with the sector’s valuation concerns and geopolitical risks.