The major stock indices ended sharply lower as concerns over AI spending caused a selloff of shares in Tesla and Google parent company, Alphabet. These concerns coincided with Brent crude futures cresting $100 a barrel for the first time in two months.
The Nasdaq Composite, S&P 500, and Dow Jones Industrial Average all experienced a downturn, falling by 2.2%, 1.2%, and 1%, respectively. The Dow lost 500 points in the process.
Shares in Tesla saw a dramatic drop of nearly 15%, leading the decline in S&P 500 and Nasdaq, after the electric vehicle manufacturer’s profits failed to meet analysts' predictions. This was due, in part, to accelerated AI spending. Despite excellent results, Alphabet shares fell by 7% due to the tech giant's increased forecast for annual capital expenditures (up to $205 billion) and a $1 billion fine from the European Commission for alleged preferential treatment of their own search services.
Other large tech companies shared the downtrend, with Amazon and Meta Platforms decreasing by 4.5% and 3.5%, respectively. Additionally, shares of chip manufacturer Texas Instruments fell 4%, while enterprise software producer ServiceNow declined by 3.5%.
Investors also tracked developments in the Middle East. Brent crude futures, the global benchmark for oil, experienced a 6.2% increase due to news of Iranian-backed Houthi rebels attacking Saudi Arabian tankers. Inflation fears were stoked further when gasoline prices moved back over $4 a gallon, leading to a hike in the 10-year Treasury yield – the highest since January 2025.
Melissa Brown, Global Head of Investment Decision Research at Simcorp, commented: "Higher oil prices are likely to add to inflation pressures… this, in turn, has led bond investors to assign a higher likelihood of a rate increase." She also mentioned growing concerns about reduced consumer spending and rising costs, indicating that inflation could negatively impact the strong state of the economy.
Bitcoin and gold futures were down in trading, while the U.S. dollar index saw a 0.3% rise.