Sharp drops for AI stocks overwhelm markets worldwide as oil prices jump

The latest shudder for stocks in the AI industry pulled markets lower worldwide on Thursday, while oil prices hit their highest levels since May on worries about the war with Iran. The S&P 500 fell 1.2% for its worst day since July, while the Nasdaq composite tumbled 2.6%. The weakness for tech stocks was so overwhelming that it masked strength for the rest of the US market, in which the majority of stocks actually rose. The Dow Jones Industrial Average added 11 points, or less than 0.1%.

AI-related stocks have been swinging on worries that their boom may be under threat because of how expensive it's become to borrow money to build datacenters and buy more AI chips. Concerns also remain that their prices shot too high following a years-long frenzy, even though companies in the industry continue to report growth.

Tech Earnings Disappoint

Lam Research, whose equipment and services help make semiconductors, reported gains in profit and revenue for the summer that were slightly stronger than analysts expected. Usually, that helps boost a stock's price, but Lam Research's tumbled 11.8%. Other big tech stocks likewise fell following quarterly reports that included at least some encouraging nuggets.

Meta Platforms, which is pushing its Muse AI agent, lost 7% after reporting stronger revenue for the latest quarter than analysts expected, shedding tens of billions in market value, though its profit fell short. The company behind Facebook and Instagram also said it was creating a new class of stock to raise money to pay for AI investments and other expenses.