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Financial Markets 07/17 15:25
NEW YORK (AP) -- The sell-off for winners of the artificial-intelligence
boom deepened Friday and yanked stock markets lower worldwide. Oil prices,
meanwhile, continued to jump because of the war with Iran.
The S&P 500 fell 1% to finish its first losing week in the last three and
only its third since the end of March. Just a couple days earlier, it had
climbed within 0.5% of its all-time high.
The Dow Jones Industrial Average dropped 406 points, or 0.8%, and the Nasdaq
composite sank 1.4%.
Chip stocks and other AI darlings once again were at the center of the shaky
trading. They've been under pressure for weeks on worries that their prices
shot too high and that voracious demand for computer memory and processors may
be unsustainable if AI ends up producing less profit and productivity than
promised.
Nvidia was the heaviest weight on the S&P 500 after dropping 2.2%. Its
recent losses forced it to briefly cede the No. 1 ranking as the most valuable
company on Wall Street Friday, but it finished the day back above Apple.
Applied Materials sank 5.6% to trim its surge for the year to 106%. Micron
Technology swung between a loss of 5.8% and a gain of 3.2% before slipping 0.5%.
Earlier in the morning, tech sold off worldwide. Indexes tumbled 6.5% in
Taipei, 4% in Tokyo and 3% in Shanghai as stocks like Taiwan Semiconductor
Manufacturing Co. dropped 7.3%.
South Korea's stock market was closed for a holiday, offering some respite,
if only temporary. It's been at the center of the AI swings because it's
dominated by two huge tech companies, Samsung Electronics and SK Hynix. This
past week alone, Seoul's Kospi stock index had one day where it surged 6.2% and
two others where it sank 6.4% and 8.9%.
News of a powerful Chinese AI model by startup Moonshot, Kimi K3, further
shook markets. Similar to when China's DeepSeek announced its AI model in early
2025, another low-cost rival to big Western AI models like ChatGPT and OpenAI
could potentially hurt demand for computer chips and other components.
European stock indexes, which have less of an emphasis on AI and tech, had
milder moves.
Adding to the pressure on Wall Street were drops for several stocks
following their latest earnings reports. Companies are under pressure to
deliver big growth for the spring to justify the big moves upward their stock
prices have already made.
Netflix sank 7.3% after its revenue for the latest quarter fell just short
of analysts' expectations, even though its profit was bigger than expected. Its
forecasts for upcoming revenue and profit in the summer also fell below
expectations.
Intuitive Surgical, a maker of robotic surgical systems, dropped 14.1%
despite topping expectations for the latest quarter. Analysts pointed to
worries about slowing procedure growth because of the expiration of enhanced
tax credits that helped lower the cost of health insurance for many Affordable
Care Act enrollees.
Elon Musk's SpaceX fell 5.4% and touched its lowest level since its stock
began trading on the Nasdaq just over a month ago. The owner of the xAI
business has been swept up in the swings for AI stocks, and it also had to
abort a test flight of its mega Starship rocket Thursday within a second or so
from blasting off.
All told, the S&P 500 fell 76.08 points to 7,457.69. The Dow Jones
Industrial Average dropped 406.55 to 52,146.42, and the Nasdaq composite sank
361.70 to 25,520.24.
More climbs for oil prices also pressured the stock market.
The price for a barrel of Brent crude, the international standard, jumped
4.6% to settle at $88.10, up from roughly $76 a week ago.
The United States expanded its airstrike campaign against Iran early Friday
by hitting more bridges and collapsing a tower at a key Iranian port. That
raised further worries about whether oil tankers will be able to use the Strait
of Hormuz to carry crude from the Persian Gulf to customers worldwide.
High oil prices have sent Treasury yields upward in the bond market, which
threaten to slow the economy and undercut prices for stocks and all kinds of
other investments. Higher yields have already sent the average 30-year mortgage
rate to its highest level in nearly a year.
But longer-term Treasury yields eased Friday. The yield on the 10-year
Treasury fell to 4.55% from 4.57% late Thursday.
A report suggested sentiment among U.S. consumers is improving more than
economists expected, while expectations for upcoming inflation eased. That's
important for the Federal Reserve, which is considering hikes to interest rates
to keep a lid on inflation.
If expectations for inflation remain anchored, it could prevent a vicious
cycle where people make moves in anticipation of higher inflation, which only
worsen it.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed to this
report.
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