Economy

AI stocks slide worldwide as oil hits five-month high on Iran war

S&P 500 drops 1.4 percent while Meta discloses 825 billion dollars in further AI contracts, war now inflates the power bills of the data centers the boom depends on

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Three commercial vessels floating in the water at sunset. Three commercial vessels floating in the water at sunset. nbcnews.com
Meta, led by Mark Zuckerberg, reported that the expansion of its Muse personal assistant overseas is being hindered by a scarcity of computing power.Annabelle Gordon / Bloomberg via Getty Meta, led by Mark Zuckerberg, reported that the expansion of its Muse personal assistant overseas is being hindered by a scarcity of computing power.Annabelle Gordon / Bloomberg via Getty nbcnews.com
Elon Musk's Tesla reported that it was scaling up its Cybercab fleet in Austin, Texas. Win McNamee / Getty Elon Musk's Tesla reported that it was scaling up its Cybercab fleet in Austin, Texas. Win McNamee / Getty nbcnews.com
AI stocks undercut markets worldwide as oil climbs to its highest price since May – WTOP News AI stocks undercut markets worldwide as oil climbs to its highest price since May – WTOP News wtop.com

US equity markets sold off sharply on Thursday as two of the year's dominant trades — AI infrastructure spending and cheap energy — moved against each other at once. The S&P 500 fell 1.4 percent by midmorning, the Nasdaq dropped 2.2 percent, and Brent crude climbed more than 2 percent to $111.60, touching its highest level in five months on worries about the war with Iran.

The selloff began in Asia, where markets are dense with technology stocks: South Korea's Kospi tumbled 3.5 percent, Hong Kong's Hang Seng dropped 3 percent, and Japan's Nikkei sank 2.7 percent. Lam Research reported slightly better-than-expected summer profit and revenue — and its stock fell 9.7 percent anyway, after giving a profit forecast whose midpoint came in below analyst expectations. The stock had entered the day up 52.4 percent for the year, nearly quadruple the S&P 500's gain. Meta lost 6.4 percent despite beating revenue forecasts, after a regulatory filing revealed the company intends to spend an additional $825 billion on contracts tied to its AI infrastructure buildout — spending Meta said is necessary because a scarcity of computing power is hindering the overseas expansion of its Muse assistant. Nvidia, the largest stock on Wall Street by total value, fell 3.8 percent. CoreWeave, which borrowed money to buy Nvidia chips and rents them out over the cloud, dropped 7.1 percent amid worries about its debt. Nvidia's Jensen Huang said on CNBC that capital to finance the AI boom was becoming scarce due to higher rates and a glut of existing commitments.

Investors moved into Treasuries, sending yields lower — a flight from risk rather than a bet on growth. Reporting on Wednesday said Israel and the US are preparing a military operation against Iran after the November 3 midterms, with likely targets including Iranian energy infrastructure and nuclear sites, according to the New York Times. Iranian officials have promised widespread retaliation and pointed to critical Middle Eastern data center sites and undersea internet cables as potential targets. The AI buildout, in other words, now sits on both sides of the war's ledger: the chips and data centers that markets fear were overbought are the same ones whose power bills and physical locations the war is inflating.

Donald Trump frequently points to solid stock gains as evidence his agenda has made Americans richer; the markets remain near all-time highs. Henry Allen, macro strategist at Deutsche Bank, wrote to clients Thursday that investors are grappling with AI growth concerns, higher oil prices, and ongoing fiscal stress — the last of which dragged France's CAC 40 down 1 percent on another jump in French government bond yields.