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Stocks fell Wednesday as oil prices soared above $111 a barrel on reports that the US and Israel are planning new strikes on Iran, while Meta and Tesla led tech stocks lower on AI spending concerns.
The Dow Jones Industrial Average sank 182 points, or 0.3%, by about11:15 a.m. ET, while the S&P 500 and Nasdaq dropped 1.3% and 2.3%, respectively.
Brent crude oil futures rose 2.3% to $111.32 a barrel while West Texas Intermediate crude went up 1.7% to $98.81.
Oil prices climbed as traders feared an escalation in the Middle East conflict, after about a month-long pause on US strikes on Iran.
National average gasoline prices have remained stubbornly above $4 a gallon.
US and Israeli officials have drawn up plans for a “short but intensive” operation in Iran after the midterm elections, the New York Times reported Wednesday.
Trump told reporters late Wednesday that “something one way or another” will “happen fairly soon” in Iran. He has repeatedly promised there will be no strikes on Iran before the midterms.
The US also ordered non-emergency personnel and their families to leave Saudi Arabia, which investors took as another sign of potential upcoming operations.
State Department spokesman Tommy Pigott in a social-media post denied a report that the government is preparing to order federal employees at other US embassies across the Gulf to exit the region, saying the demand affects Saudi Arabia because of Houthi attacks in the region.
Meanwhile, Tesla and Meta led tech stocks lower even after reporting strong earnings, as traders zeroed in on their AI spending plans – and grew concerned that the massive capex may not pay off.
Meta shares slumped 6.1% Thursday despite recording a stunning 26% jump in quarterly revenue. Investors were more concerned about news that Mark Zuckerberg’s social-media giant is planning a new class of stock to help finance its jaw-dropping AI spending.
Tesla also dipped 1.2% after the automaker revealed it is planning to spend far less on AI and robotics than Wall Street had anticipated, a potential sign that it is growing wary of AI’s ability to drive revenue.
AI and tech stocks have been suffering a bumpy ride over the past few months as investors bounce between optimism over the futuristic tech and concerns that it’s fueling a crisis akin to the “dot-com bubble” of the late 1990s and early 2000s.
Shares of AMD, Micron and Nvidia also slid 7.8%, 4.3% and 4%, respectively.
Major AI cloud providers, also known as “neoclouds” – which make their money by renting out the computing capacity needed to power data centers – like CoreWeave and Nebius slumped 8.5% and 7.3%, respectively.
Nvidia CEO Jensen Huang told CNBC Thursday that demand for neocloud firms is “off the charts” – but limited capital is reining in growth.
“If you look at the fundamentals, the demand for the neoclouds is off the charts,” Huang said. “What is missing in the middle is the working capital to fuel that growth…because there’s just so much demand across so many sectors of AI, there’s a scarcity of capital.”
“The demand of the capital is much greater than the availability of the capital,” he said, though he added: “That’s going to get solved.”
His comments only stoked more anxiety as investors are already concerned about the billions of dollars being spent by tech giants to build up troves of compute.