S&P 500 drops 4.4% as AI stocks lead Wall Street sell-off

New York investors faced a sharp decline in equity markets Thursday as a sell-off in artificial intelligence stocks dragged down major U.S. benchmarks. The S&P 500 index fell 4.4%, marking its steepest drop since April 2025. This loss erased the market's gain from the previous day, which had been its best in three months.

The Dow Jones Industrial Average lost 1,833 points, or 3.4%. The Nasdaq composite fell 5.5%, dropping 1,421.52 points to close at 24,315.00. The index now sits 11.9% below its all-time high set last month. A decline of more than 10% from a peak is classified by analysts as a correction.

Nvidia, a primary supplier of chips for AI systems, led the losses with a 9.3% drop. The company is the largest weight in the S&P 500, so its movement heavily influences the broader index. Nvidia shares are down 2.6% for the year, following gains of roughly 39%, 171%, and 239% in the previous three years. Advanced Micro Devices fell 17.3%, and CoreWeave, a cloud-based AI chip rental firm, dropped 9.8%.

GE Vernova, which provides power equipment for data centers, sank 7.5%. Investors are concerned that rising borrowing costs may slow the construction of new AI data centers. Critics also argue that AI stock prices have risen too quickly and may be in a bubble. Tuesday's U.S. midterm elections added pressure, as Democratic victories raised the possibility of regulatory pauses on data center projects. Voters across party lines have expressed concerns about rising power bills caused by these facilities.

Not all stocks fell. AppLovin jumped 31% after reporting revenue and profit that exceeded analyst expectations. The company's board approved a share buyback program worth up to $3.2 billion, bringing the total potential value of the program to $3.6 billion. Tapestry, the parent company of Coach and Kate Spade, rallied 7.1% after delivering stronger than expected profits and raising its forecasts for the current fiscal year.

Global markets felt the impact of the tech sector's weakness. South Korea's Kospi index tumbled 5.3%, and Japan's Nikkei 225 sank 1.8%. In Europe, London's FTSE 100 dipped 0.4% after the Bank of England raised its main interest rate for the first time in three years. Bank Governor Andrew Bailey stated that the bank's next moves on interest rates will largely depend on the resolution of the war in Iran.

Oil prices recovered some ground Thursday. A barrel of Brent crude rose 3.9% to $98.29, rebounding from a nearly 9% drop the day before. In the bond market, the yield on the 10-year Treasury fell to 4.84% from 4.90% late Wednesday. It had stood above 5.30% last month. Investors moved into U.S. Treasury bonds as stock prices fell, despite recent reports showing fewer unemployment claims and better-than-expected summer productivity in the U.S. economy.