Stocks Tumble as China's AI Advances and Mideast Tensions Hit Chipmakers
Major indexes closed out a losing week with chipmakers leading the decline amid fears of Chinese competition in artificial intelligence and renewed geopolitical instability.
Major U.S. stock indexes concluded a losing week on Friday, with significant declines in chipmaker shares driven by concerns over China's advancements in artificial intelligence and escalating conflict in the Middle East.
The Dow Jones Industrial Average dropped 380 points, or 0.7%, while the S&P 500 and Nasdaq fell 1% and 1.4% respectively, all three benchmarks ending the week in negative territory. Apple briefly surpassed Nvidia as the most valuable U.S. company on Friday, as its stock edged up less than 0.1% while Nvidia's shares slipped 2.7%.
Mounting concerns about substantial spending on AI and the potential for an “AI bubble” have contributed to weeks of volatile trading in tech stocks. This sell-off intensified Friday following reports suggesting China is narrowing the gap with the U.S. in the AI race. Chinese AI firm Moonshot unveiled a new open-source model with capabilities it claims rival those of U.S. companies Anthropic and OpenAI. This development follows the recent release of an AI model by Chinese startup Z.ai, which reportedly rivals Anthropic's Fable and Mythos models and has gained traction on a global leaderboard of popular AI bots.
Experts have been cautioning about the threat posed by lower-cost Chinese AI models to U.S. laboratories, which typically charge premium prices for the "tokens" required to operate their chatbots. Shares in major chip manufacturers including Samsung, TSMC, AMD, and Broadcom experienced declines of 8.8%, 2.8%, 1.1%, and 0.5% respectively.
Adding to market instability, renewed airstrikes between the U.S. and Iran near the Persian Gulf also impacted stock performance this week. Brent crude oil prices rose 3.9% on Friday to $87.44 a barrel, and West Texas Intermediate crude increased 3.8% to $81.92. Kuwait reported an Iranian attack on a power and water plant, while U.S. Central Command confirmed its continued strikes against Iran. Iran also stated it targeted U.S. military forces in Syria and Bahrain. Analysts suggest that U.S. gasoline prices may remain above $3 for several months, contingent on a peace agreement that reopens the Strait of Hormuz.
Separately, Tesla founder Elon Musk reportedly lost his trillionaire status this week, with his net worth falling to $807.1 billion, according to Forbes, as SpaceX shares plummeted over 13%.