Wall Street’s AI slump picks up pace, ASX set to advance
Staff writers
Updated ,first published
Australia’s stock market opened in positive territory following news that the US and Iran are backing away from a new escalation that threatens the fragile ceasefire supporting peace talks.
The S&P/ASX 200 index rose 41.2 points, or 0.5 percent, to 8805.4. Wall Street futures rose after a report that the United States and Iran agreed to stop attacking each other before peace talks resume this week on the Strait of Hormuz and other issues aimed at ending the war. It’s a sign of easing tensions after several days of tit-for-tat attacks that tested the ceasefire.
Iran launched missiles and drones at US military facilities in Kuwait and Bahrain overnight, shortly after US President Donald Trump threatened to destroy Iran’s leadership if they did not adhere to an interim agreement to end their war. But Axios, citing an unidentified US official, reported that the US and Iran later agreed to stop the attacks and meet this week in Qatar to continue talks.
Oil prices rose in early trading; Brent, the international standard, rose 0.6 percent to $72.39, US oil rose 1 percent to $69.88, and the Australian dollar traded at 68.93¢.
Most U.S. stocks rose on Friday after oil prices fell to pre-war levels with Iran, but declines in stocks due to the artificial intelligence technology craze kept the market in check.
The S&P 500 closed nearly flat, losing less than 0.1 percent for its second losing week in the last 13. The Dow Jones Industrial Average fell 44 points, or 0.1 percent, and the Nasdaq composite fell 0.2 percent.
Meanwhile, healthcare stocks became one of the strongest bullish forces in the market after a committee of the European Medicines Agency recommended that several drugs be approved and treatment indications extended for another dozen. This includes Eli Lilly, whose shares rose 7.1 percent.
Besides Lilly, nearly two out of every three stocks in the S&P 500 rose. But further declines in AI stocks helped overshadow these.
After rising to tremendous heights and leading the market for years, AI shares have been under pressure recently due to concerns that their profits will not be able to keep up with the massive rise in stock prices. And these declines have a huge impact because AI stocks have become Wall Street’s largest and most influential stocks, giving movements in stock prices more weight on the indexes than others.
For example, Micron Technology’s 6.7 percent decline was the heaviest weight on the market. The maker of memory for computers was a big winner this year; Its stock has nearly quadrupled because the AI boom has created a surge in demand for its products.
But investors saw the downside of that increase on Thursday, when Apple said it had to significantly raise prices on laptops and other products to make up for the increase in memory prices. The concern is that such high prices could ultimately lead to reduced demand.
Emphasizing that AI stocks are following a fluctuating course, SpaceX fell below $ 149, with a 2.9 percent decrease for a short time in the morning hours. It then erased the loss and headed for a 3.5 percent gain before finishing up a modest 0.2 percent.
After initially selling shares at $135 in its enthusiastic IPO earlier this month, SpaceX’s price briefly rose above $225 in the first few days of trading. In addition to rockets, Elon Musk’s company also owns the xAI artificial intelligence business.
The day’s biggest loss on the S&P 500 was a 23.7 per cent loss for ON Semiconductor, which said it had agreed to buy Synaptics in an all-stock deal worth roughly US$7 billion ($10.1 billion).
Overall, the S&P 500 fell 3.47 points to 7,354.02 points. The Dow Jones Industrial Average fell 44.51 to 51,876.11, and the Nasdaq composite fell 60.99 to 25,297.62.
Treasury yields declined due to the impact of oil prices in the bond market. The yield on the 10-year Treasury note fell to 4.37 percent from 4.40 percent at the end of Thursday.
That rate fell after a report showed inflation expectations among U.S. consumers next year fell to 4.6 percent from 4.8 percent in May. This is still high, but moving downward means less likelihood of a vicious circle in which higher inflation expectations lead to changes in behavior that lead to higher inflation.
High yields in bond markets around the world, driven by concerns about inflation, pose a threat to slowing economies and have already sent higher rates for mortgages and other types of loans. High returns also hurt the prices of investments, especially those seen as the most expensive. This increases the pressure on AI winners.
Asian stock markets started Friday with sharp declines due to losses from AI winners.
In Japan, Softbank Group Corp.’s 12.5 percent decline helped the Nikkei 225 index fall 4.2 percent. The company is a major investor in OpenAI, maker of ChatGPT and New York Times He suggested that OpenAI is considering postponing the initial public offering of its shares from the second half of this year to next year.
Such an IPO would give OpenAI a chance to raise more cash to spend on its data centers, as well as an opportunity for early investors like Softbank to cash out some of their assets. But the recent stumbles for SpaceX’s shares and AI stocks in general may be a sign of waning appetite for big AI stocks among investors.
In South Korea, SK Hynix lost 8.4 percent and Samsung Electronics lost 5.3 percent. This helped the Kospi fall 5.8 percent, bringing its gains for the year down to 99.6 percent.
