AI stocks tumble as oil surge and bond yields drag Wall Street lower

Chipmakers led a tech selloff while rising oil prices and Treasury yields weighed on markets. Samsung slumped despite strong profit guidance, Rivian sank on a share sale and global stocks retreated.

The roller-coaster ride for AI stocks snapped back down on Tuesday and dragged Wall Street lower. The S&P 500 fell 0.4% even though the majority of stocks within the index rose. The drops for stocks in the artificial-intelligence industry dragged the Nasdaq composite down (1.2%) while the Dow Jones Industrial Average dropped 130 points (0.2%) from its record.

Brent crude, the international standard, rose 3% to settle at $74.16 per barrel. Higher oil prices put upward pressure on inflation, and Treasury yields climbed in the bond market. The yield on the 10-year Treasury rose to 4.54% from 4.48% late Monday and from just 3.97% before the war with Iran began.

Samsung Electronics tumbled 6.9% in Seoul. The tech giant gave a preliminary look at its performance for the second quarter, and the numbers were strong. Samsung Electronics said it expects to report its operating profit surged roughly 1,800% from a year earlier. AI stocks have been under similar pressure in recent weeks on worries that their prices shot too high and that AI may not produce enough productivity and profits to make all the investments in chips and data centers worth it.

Drops of 6.5% for Advanced Micro Devices, 9.7% for Intel and 4.7% for Micron Technology were the heaviest weights on the market. SpaceX which owns the xAI business fell 6.8% in its first trading after getting included in the Nasdaq 100 index. Vertex Pharmaceuticals slipped 1.4% after saying it agreed to buy Crinetics Pharmaceuticals for $85 per share in cash. Crinetics developer of therapeutics for endocrine diseases, soared 98.7%. Rivian Automotive dropped 18.1% after the electric vehicle company said it?s selling 75 million shares of its stock, a move that dilutes the ownership stakes of earlier shareholders.

Stocks also felt pressure from a rise in oil prices after the British military said three tankers were struck by projectiles in the Strait of Hormuz. The United States later revoked a license that had authorized the sale of Iranian oil as part of an interim deal to end the fighting between the U.S. and Iran. That hurt hopes that the Strait of Hormuz may fully reopen to oil tankers carrying crude to customers worldwide from the Persian Gulf.

In stock markets abroad, South Korea?s Kospi tumbled 4.9% because Samsung Electronics by itself makes up more than a quarter of the index. Japan?s Nikkei 225 fell 2.1%, and Germany?s DAX lost 1.4% for two of the world?s bigger moves.

High yields worldwide have been rattling investors since the war sent oil prices bursting above $100 per barrel in March. The worry is that high inflation may force the Federal Reserve and other central banks to hike interest rates. Higher rates can keep a lid on inflation, but they also slow the economy and hurt prices for all kinds of investments.

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