Wall Street traded on a mixed note on Thursday, as concerns over heavy artificial intelligence spending and a hotter-than-expected inflation reading weighed on technology stocks. The Dow Jones Industrial Average advanced, supported by gains in non-tech shares, while the S&P 500 and Nasdaq Composite remained under pressure.
At 9:32 a.m. EDT, the Dow Jones Industrial Average was up 301.41 points, or 0.58%, at 51,922.89. The S&P 500 fell 36.01 points, or 0.47%, to 7,682.93, while the Nasdaq Composite dropped 316.005 points, or 1.18%, to 26,376.863.
The divergence reflected growing investor caution around the returns from artificial intelligence investments, particularly as companies continue to spend heavily on computing infrastructure and chip capacity.
Technology stocks came under renewed selling pressure after investors grew increasingly concerned about the scale of borrowing required to finance AI infrastructure expansion.
CoreWeave shares fell around 3% in premarket trading on Thursday, following a decline of more than 15% in the previous session. Investors have become wary of the company's debt-funded AI expansion, while its corporate bond yields also surged, CNBC reported.
Concerns extended beyond infrastructure providers to semiconductor companies. Micron Technology shares fell 4%, while Advanced Micro Devices declined 3%. SanDisk dropped 5%, and US-listed shares of South Korea's SK Hynix lost 6%.
The weakness followed a sharp sell-off in South Korea, where the Kospi index plunged more than 7% overnight.
Investors were also assessing reports about Anthropic's revenue growth. CNBC reported that the AI company's revenue reached $16.8 billion in the third quarter, with some traders questioning whether its growth was sufficient to justify the substantial gains recorded by semiconductor stocks.
Fresh inflation data added to the uncertainty surrounding the outlook for US equities. Producer prices rose 1.3% month over month in September and 6.3% from a year earlier, according to the data cited in the report. Both readings exceeded economists' expectations of 0.6% and 5.5%, respectively. The increases were the largest monthly and annual gains since 2022.
The figures followed a hotter-than-expected consumer price reading on Wednesday, strengthening concerns that inflationary pressures remain persistent.
Investors are now weighing the possibility that the Federal Reserve may have to maintain a tighter monetary stance, or take a more aggressive approach to interest rates before the end of the year.
"Today's PPI report, after Wednesday's CPI, confirms inflation is getting worse as energy prices stay high," David Russell, global head of market strategy at TradeStation, said.
"Election or no election, prices are rising and the Fed might be forced to act," he added.
Higher interest rates can weigh on technology stocks by reducing the present value of their expected future earnings, while also increasing financing costs for companies investing heavily in AI infrastructure.
While technology stocks struggled, gains in other sectors helped cushion the broader market.
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Walmart shares climbed nearly 3% in premarket trading, while pharmaceutical company Merck gained more than 1%. The advances offered some support to the Dow even as technology-heavy benchmarks faced selling pressure.
Earlier in the session, S&P 500 futures had fallen 0.3%, while Nasdaq-100 futures dropped 1.3%. Dow futures, by contrast, rose 150 points, or 0.3%, indicating relative strength in the blue-chip index ahead of the opening bell.
The session highlights a growing divide across Wall Street, with investors reassessing high valuations in the AI trade while monitoring inflation, borrowing costs and the Federal Reserve's next policy moves.
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