Wall Street Mixed as AI Stocks Drag Down Market Despite Broader Gains

The U.S. stock market experienced a mixed performance on Friday, with broad gains tempered by significant drops in artificial intelligence (AI) stocks. The S&P 500 remained virtually unchanged for the week as of Friday morning, struggling to overcome losses driven by a sell-off in AI-related equities.

The Dow Jones Industrial Average saw a modest increase of 39 points, or 0.1%, while the Nasdaq composite declined by 0.2%. Earlier in the day, the S&P 500 had fallen as much as 0.9% before recovering.

Stock performance received a boost as oil prices decreased, with Brent crude falling 3.9% to $72.53 per barrel. This decline reversed the price surge that occurred prior to military actions involving Iran and the subsequent closure of the Strait of Hormuz. Lower oil prices benefited companies with substantial fuel expenses, such as United Airlines, which rose 1.7%.

Health care stocks also showed strength, partly due to recommendations from a European Medicines Agency committee for several new medicines and extensions for existing ones. Eli Lilly’s stock climbed 6.3% following these developments.

Despite advances in roughly two-thirds of S&P 500 companies, the downward pressure from AI stocks proved significant. These companies, which have led market performance in recent years, are facing increased scrutiny due to concerns that their profits may not justify their high valuations. Their substantial market capitalization means their stock movements have a disproportionate impact on major indexes.

Micron Technology experienced one of the heaviest declines, falling 4.1%. The memory chip manufacturer, a significant beneficiary of the AI boom, has seen its stock price surge this year due to high demand for its products. However, concerns about potential impacts on demand emerged after Apple announced price increases for its products, attributed to rising memory costs.

SpaceX's stock also continued its downward trend, dipping 0.8% to below $152, approaching its lowest point since its Wall Street debut earlier in the month. The company, which owns the xAI artificial-intelligence business, had initially seen its stock price soar above $225 shortly after trading began at $135 per share.

Onsemi recorded the largest single-day loss in the S&P 500, dropping 21.1% after announcing an all-stock acquisition of Synaptics valued at approximately $7 billion.

In the bond market, Treasury yields eased in tandem with oil prices, with the 10-year Treasury yield falling to 4.37% from 4.40%. Elevated bond yields globally, driven by inflation concerns, have raised borrowing costs for mortgages and loans and put pressure on investment prices, particularly for highly valued assets like AI stocks.

Asian markets mirrored the downward trend in AI stocks, with significant losses reported. In Japan, Softbank Group Corp's 12.5% plunge contributed to the Nikkei 225's 4.2% decline. Softbank is a major investor in OpenAI, which reportedly is considering delaying its initial public offering until next year amid broader market concerns about AI stocks.

South Korean companies SK Hynix and Samsung Electronics also saw declines of 8.4% and 5.3%, respectively, impacting the Kospi's 5.8% drop.