Wall Street hit by AI slump as China’s Moonshot shakes markets
Stan Choe
The sell-off for the winners of the AI boom has deepened and stock markets around the world have tumbled. Meanwhile, oil prices continued to rise due to the war with Iran.
The S&P 500 fell 1 percent, marking its first losing week in three weeks and only the third since the end of March. It had climbed to within 0.5 percent of its all-time high just a few days ago.
The Dow Jones Industrial Average fell 406 points, or 0.8 percent, and the Nasdaq composite fell 1.4 percent. Australian stock market futures pointed to a 54-point, or 0.6 percent, gain at the open, but those were set before the United States launched more airstrikes on Iran in response to the killing of U.S. soldiers on Sunday and Iran launched missiles at Jordan, risking expanding the conflict into neighboring Israel. The Australian dollar was trading at 69.71¢.
Increases in oil prices also put pressure on the stock market. The price of a barrel of Brent crude oil, the international standard, rose 4.6 percent to $88.10, from about $76 a week ago. Developments in the Middle East will cause prices to rise as trade resumes this morning.
Chip stocks and other AI darlings were once again at the center of shaky trading. They have been under pressure for weeks over concerns that prices have risen too much and the insatiable demand for computer memory and processors could become unsustainable if AI produces less profit and productivity than promised.
Nvidia was the S&P 500’s heaviest weight, falling 2.2 percent. Its recent losses caused it to briefly lose its No. 1 spot as the most valuable company on Wall Street on Friday, but it finished the day behind Apple.
Applied Materials fell 5.6 percent, reducing its gain for the year to 106 percent. Micron Technology fluctuated between a 5.8 percent loss and a 3.2 percent gain before falling 0.5 percent.
In the early morning hours the technology was sold worldwide. Taiwan Semiconductor Manufacturing Co. With stocks such as losing 7.3 percent in value, indices fell 6.5 percent in Taipei, 4 percent in Tokyo and 3 percent in Shanghai.
The South Korean stock market was closed for a holiday and provided some respite, albeit temporary. It is at the center of artificial intelligence volatility because it is dominated by two major technology companies, Samsung Electronics and SK Hynix. In the past week alone, Seoul’s Kospi stock index rose 6.2 percent on one day and fell 6.4 percent and 8.9 percent on the other two days.
News of startup Moonshot’s Kimi K3, a powerful Chinese artificial intelligence model, further shook the markets. Similar to China’s DeepSeek announcing its AI model in early 2025, another low-cost rival to major Western AI models like ChatGPT and OpenAI could potentially hurt demand for computer chips and other components.
European stock indexes, which place less emphasis on artificial intelligence and technology, showed more moderate movements.
The declines in many stocks following the latest earnings reports also increased the pressure on Wall Street. Companies are under pressure to deliver big growth in the spring to justify the big upward moves stock prices have already made.
Netflix lost 7.3 percent of its value in the last quarter after its revenue fell slightly below analysts’ expectations, even though its profits were higher than expected. Forecasts for future revenue and profit in the summer months also fell below expectations.
Robotic surgery systems manufacturer Intuitive Surgical fell 14.1 percent in the last quarter, although it was above expectations. Analysts have noted concerns that procedure growth will slow due to 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 percent, reaching its lowest level since its shares began trading on Nasdaq just over a month ago. The owner of the xAI business has been dragged into swings over artificial intelligence stocks and was also forced to cancel a test flight of his mega Starship rocket on Thursday, a second or so after the explosion.
Overall, the S&P 500 fell 76.08 points to 7,457.69. The Dow Jones Industrial Average fell 406.55 to 52,146.42, and the Nasdaq composite index fell 361.70 to 25,520.24.
The United States expanded its air strike campaign against Iran early Friday, hitting more bridges and destroying a tower in a major Iranian port. This has raised concerns about whether oil tankers could use the Strait of Hormuz to transport crude oil from the Persian Gulf to customers around the world.
High oil prices have caused Treasury yields to rise in the bond market, which threatens to slow the economy and lower the prices of stocks and all other types of investments. Higher yields have caused the average 30-year mortgage rate to rise to the highest level in almost a year.
But long-term Treasury yields fell on Friday. The yield on the 10-year Treasury note fell to 4.55 percent from 4.57 percent at the end of Thursday.
Confidence among U.S. consumers has improved more than economists expected, while expectations for upcoming inflation have eased, a report suggested. This is important for the Federal Reserve, which is considering raising interest rates to keep inflation in check.
If inflation expectations remain constant, it can prevent a vicious cycle in which people act in anticipation of higher inflation, making inflation worse.
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