Wall Street stocks fell sharply on Thursday as stronger-than-expected earnings from Meta Platforms and Tesla failed to ease investor concerns over artificial intelligence spending, while surging oil prices added to inflation fears.
The technology-heavy Nasdaq Composite tumbled 455 points, or 1.7%, to 26,247, leading losses across major US stock indices.
The S&P 500 declined nearly 70 points, or 0.9%, to 7,688, while the Dow Jones Industrial Average fell 146 points, or 0.3%, to 52,711.
Meta Platforms shares dropped 5.5% despite reporting a 26% increase in quarterly revenue to $64.6 billion, supported by stronger digital advertising demand, AI-powered content recommendations and higher advertising prices.
However, investors remained concerned about the substantial costs associated with expanding Meta’s artificial intelligence infrastructure and developing increasingly sophisticated AI services.
The Facebook, Instagram and WhatsApp owner has highlighted significant opportunities to generate revenue from AI technologies, but rising computing and operating expenses continue to raise questions about future profitability.
Meta also reportedly reached an arrangement with Chief Executive Mark Zuckerberg concerning potential California wealth tax liabilities, adding another development for investors to assess.
Tesla shares slipped 0.1% despite reporting better-than-expected earnings, with attention shifting towards Elon Musk’s suggestion of a potential merger between the electric vehicle manufacturer and SpaceX.
The proposed combination could bring together Tesla’s automotive, robotics and artificial intelligence operations with SpaceX’s aerospace, satellite communications and technology businesses.
However, no formal merger agreement has been announced, and any potential transaction would require further discussions, financial assessment and regulatory consideration.
The broader technology sell-off reflects increasing investor scrutiny of AI-related capital expenditure, with markets questioning whether substantial infrastructure investment will generate sufficient long-term returns.
Meanwhile, Brent crude surged above $112 a barrel to its highest level in five months, following renewed attacks in Saudi Arabia and disruption to shipping through the Strait of Hormuz.
The increase in energy prices has intensified concerns about inflation, potentially complicating the Federal Reserve’s interest rate outlook and increasing costs for businesses and consumers.
Higher oil prices and uncertainty over AI profitability created a challenging backdrop for US equities, with technology shares bearing the heaviest selling pressure.
Investors will now focus on further corporate earnings, developments in Middle Eastern energy supplies and Federal Reserve commentary for indications of whether the latest market volatility will continue.
