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Wall Street retreated Thursday as Nvidia’s sharp decline overshadowed broader market gains, highlighting investors’ growing concerns about the sustainability of the artificial intelligence boom.
The S&P 500 fell 0.5% to 6,908.86, while the tech-heavy Nasdaq composite dropped 1.2% to 22,878.38. The Dow Jones Industrial Average bucked the trend, inching up 17.05 points to 49,499.20.
Nvidia, which has become a bellwether for AI investment sentiment, tumbled 5.5% in its worst single-day performance since April, despite posting exceptional quarterly results. The chipmaker once again exceeded analyst expectations for profit growth and provided revenue forecasts that surpassed Wall Street estimates.
“Our customers are racing to invest in AI compute — the factories powering the AI industrial revolution and their future growth,” said Nvidia CEO Jensen Huang in the earnings announcement.
However, the stellar performance wasn’t enough to impress investors, who are increasingly concerned about whether Nvidia’s customers will maintain their massive spending on AI infrastructure. Questions are mounting about the timeline for companies to recoup their multibillion-dollar AI investments through productivity gains.
As the largest U.S. stock by market capitalization, Nvidia’s decline accounted for more than four-fifths of the S&P 500’s losses on Thursday, underscoring its outsized influence on major indices.
The broader market showed more resilience, with seven stocks rising for every three that fell within the S&P 500. Salesforce emerged as a bright spot, climbing 4% after beating profit expectations. The customer relationship management company has been under pressure this year, with its shares down nearly 25% on fears that AI-powered competitors could threaten its business model.
In an effort to reassure investors, Salesforce announced plans to return up to $50 billion to shareholders through stock buybacks and increased its dividend. CEO Marc Benioff emphasized that “agentic AI is a tailwind for our business,” suggesting the technology would enhance rather than undermine the company’s offerings.
The market’s reaction reflects the broader uncertainty surrounding AI’s impact across industries. Companies spanning from trucking logistics to financial services have seen their stocks come under pressure as investors try to anticipate which businesses will thrive or falter in an AI-driven economy. Software companies have experienced particularly dramatic swings, though a key ETF tracking the sector rose 2.1% Thursday, trimming its year-to-date losses to below 22%.
In the media space, Warner Bros. Discovery shares edged down 0.3% after reporting a $252 million fourth-quarter loss. Investors appeared more focused on the company’s potential acquisition offers from Netflix or Paramount Skydance than on its current financial performance.
Global oil markets experienced significant volatility as the United States and Iran engaged in indirect talks regarding Iran’s nuclear program. A diplomatic resolution would reduce the threat of conflict that could disrupt oil supplies. The U.S. has assembled its largest force of warships and aircraft in the Middle East in decades, raising the stakes in what analysts at Macquarie described as “make or break” negotiations.
After sharp swings throughout the session, U.S. benchmark crude settled at $65.21 per barrel, up 0.3%, while Brent crude, the international standard, ended at $70.75 per barrel, down 0.1%.
Overseas markets showed mixed results. European indices posted modest gains, while Asian markets were divided. South Korea’s Kospi continued its remarkable run, jumping 3.7% to another record high on strong tech stock performance. The index has surged nearly 50% since the start of the year. In contrast, Hong Kong’s Hang Seng fell 1.4%.
In the bond market, Treasury yields eased slightly, with the 10-year yield falling to 4.01% from 4.05%. Weekly unemployment claims increased marginally, in line with economists’ expectations, and remained relatively low by historical standards.
As markets continue to digest the implications of AI investments and geopolitical developments, investors remain cautious about the technology sector’s ability to deliver on its ambitious promises.
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9 Comments
The AI industry is clearly at a critical juncture, with investors scrutinizing the long-term viability of these investments. Nvidia’s performance will be closely watched as a bellwether for the broader AI market and its ability to deliver tangible results.
Interesting to see the market’s reaction to Nvidia’s AI-focused results. The chipmaker’s performance has become a bellwether for the broader AI investment sentiment. Curious to see how this plays out as companies continue pouring billions into AI infrastructure.
You raise a good point. Nvidia’s ability to maintain momentum will likely depend on whether its customers can recoup their massive AI investments in the long run. The timeline for that will be closely watched.
The decline in Nvidia’s stock despite its impressive quarterly performance underscores the market’s growing skepticism around the AI boom. Investors are likely looking for more clarity on the timeline and path to profitability for these massive AI investments.
Exactly. The market is now focused on the real-world impact and commercial potential of AI, rather than just the hype. Nvidia’s ability to demonstrate a sustainable path to monetizing its AI capabilities will be key in regaining investor confidence.
It’s interesting to see the market’s reaction to Nvidia’s strong results, highlighting the increased scrutiny around the AI investment landscape. As the AI industry matures, investors will likely be more discerning in their assessment of companies’ long-term prospects.
Well said. The market seems to be moving beyond the initial hype and is now demanding more concrete evidence of the commercial viability and scalability of AI investments. Nvidia’s ability to navigate this transition will be crucial.
The AI boom has certainly been a driving force for Nvidia, but the market seems to be growing more cautious about the sustainability of these investments. Investors will be closely monitoring the pace of AI adoption and deployment across industries.
Absolutely. Companies are racing to invest in AI, but the market is now questioning whether the payoff will materialize as quickly as expected. Nvidia’s performance will be a key indicator of the market’s confidence in the AI revolution.