Nasdaq Posts June's Worst Drop as AI Stocks Slump, Oil Rises

U.S. stock markets closed sharply lower today, with the Nasdaq Composite Index plunging 2.6% to a historic low, marking its worst single-day performance since June. The Dow Jones Industrial Average also declined in tandem, while the S&P 500 Index fell slightly less than 5%. This significant downturn was driven primarily by a sell-off in technology stocks, particularly high-growth companies centered on artificial intelligence (AI). Investors grew concerned about future earnings prospects as investment costs rose and revenue expectations were dampened, triggering widespread selling pressure.

Over the past year, AI-related companies have substantially increased their research and development expenditures. Many firms have been forced to invest heavily in computing resources and data acquisition to advance large language models and automation technologies, which has compressed short-term revenue growth rates. Investors are worried that if these expenditures fail to translate into immediate market value, stock prices will face significant adjustments. Furthermore, recent expectations of continued rate hikes by the Federal Reserve have lowered the market’s risk tolerance for highly leveraged companies, further amplifying the sell-off in AI stocks.

Meanwhile, international oil prices surged due to heightened geopolitical tensions, with crude oil futures prices breaking through the $70-per-barrel mark, impacting the energy sector. Rising oil prices not only improved the revenue outlook for energy companies but also introduced inflationary pressure to the broader stock market. Investors are concerned that sustained high oil prices will exacerbate corporate cost burdens and potentially prompt the Federal Reserve to implement further rate hikes, thereby suppressing valuations in the technology sector.

Against this backdrop, market risk appetite contracted significantly. High-volatility technology and energy stocks faced simultaneous selling pressure, causing the volatility index to rise. Portfolio managers broadly adjusted their allocations, shifting funds from high-valuation tech stocks to defensive bonds and value stocks to mitigate potential downside risks. This move also reflects investor uncertainty regarding future interest rate trajectories and inflation trends.

From a macroeconomic perspective, Federal Reserve monetary policy remains a focal point for the market. If inflationary pressures persist, the Fed may maintain or accelerate rate hikes, further suppressing investment demand among high-growth enterprises. On the other hand, while rising oil prices boost energy stock returns in the short term, they may drive investment in energy transition in the long run, altering the structure of the energy industry. Overall, today’s market decline is not merely a short-term sentiment fluctuation but also reflects deep-seated investor concerns regarding the interplay among AI investment returns, energy costs, and monetary policy.

(Source: Central News Agency)