Another sell-off for artificial-intelligence stocks dragged the U.S. market sharply lower.
The S&P 500 dropped 1.6% Wednesday after giving up a brief modest gain in the morning. The index had its first back-to-back drop in three weeks. The Dow Jones Industrial Average sank 1.9%, and the Nasdaq composite lost 2%.
Wall Street has been shaky since last week, when AI stocks went from roaring to records to suddenly turning lower. Among the worries is that their prices have simply shot too high, too fast. Oil prices rose after President Donald Trump threatened more strikes on Iran.
Super Micro Computer, which sells AI servers, tumbled 23.1% after saying late Tuesday that it plans to raise $7 billion in cash by selling shares of stock and convertible preferred stock. Such moves raise the most money for companies when their stock prices are high, and they can dilute the ownership stakes of existing shareholders.
Micron Technology went from an early loss of nearly 4% to a modest gain and back to a loss of 4.7%. It's coming off a wild stretch where it sank 7.7% last Thursday, then plunged another 13.3% Friday and rallied 9.9% Monday. Despite all the swings, the computer memory maker's stock is still up 212.6% for the year so far.
Stocks of companies whose products and services help to make semiconductors had been the strongest forces pushing upward on the S&P 500 during the morning, but they trimmed their gains as the day progressed. KLA, for example, pared its early jump of 7.7% to 0.1%.
Nvidia, the chip company that's grown into a nearly $4.9 trillion behemoth because of the AI boom, was the heaviest weight on the S&P 500 after falling 3.4%.
Some of the pressure on AI stocks could also be coming from investors pulling cash out to prepare for high-profile debuts on U.S. stock markets for several AI giants. SpaceX's initial public offering could come later this week, for example.
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In the bond market, Treasury yields held relatively steady following an update on U.S. inflation. While inflation accelerated to its highest level in three years, the numbers were pretty much exactly what economists had forecast. The rise in an important underlying measure of inflation, meanwhile, was not as bad from April through May as economists expected.
The yield on the 10-year Treasury edged up to 4.54% from 4.53% late Tuesday. The two-year Treasury yield, which more closely tracks expectations for what the Federal Reserve will do with its overnight interest rates, ticked down to 4.12% from 4.13%.
Traders have been building bets recently that the Fed will have to hike its main interest rate at least once this year, given how high inflation is and how strong the U.S. job market remains. Wednesday’s inflation update caused them to trim their bets by a smidgen, according to data from CME Group.
High yields can slow entire economies and undercut prices for all kinds of investments, including stocks and cryptocurrencies. They hit investments seen as the most expensive in particular, and some critics are calling AI a bubble where investment inflated too far.
Keeping things uncertain are continued swings for crude oil prices, which have been rising and falling with hopes that the United States and Iran can reach a deal to reopen the Strait of Hormuz to oil tankers.
The price for a barrel of Brent crude oil rose 1.8% to $93.10 after President Donald Trump warned Iran would “pay the price” for stalled negotiations between the two on their war.
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In stock markets abroad, indexes in Europe were mixed following sharper drops in Asia.
South Korea’s Kospi tumbled 4.5%, hurt by losses for tech giants Samsung Electronics and SK Hynix.
Tokyo’s Nikkei 225 sank 1.9% after data showed Japan’s producer price index, a measure for prices at the wholesale level, rose in May at the fastest pace in more than three years. Shares of technology and telecommunications giant SoftBank Group, which has a strong AI focus, lost 8.3%.
