Stocks Tumble Amid Rising Oil Prices and AI Spending Fears

The stock market experienced a significant downturn Friday, with the Dow Jones Industrial Average falling 702 points, or 1.3%, by mid-morning ET. This decline was fueled by a confluence of factors, including oil prices reaching a five-month high and persistent concerns over technology companies' substantial investments in artificial intelligence.

The S&P 500 index also saw a notable drop, tumbling 0.4%, while the Nasdaq showed little change after experiencing its worst day since June on Thursday.

Oil prices surged, with Brent crude futures climbing 2.7% to $116.24 a barrel, marking their highest level since early May and putting them on track for a weekly increase of over 10%. West Texas Intermediate crude rose 2.9% to $102.40 a barrel. The national average price for gasoline reached $4.29 per gallon, according to AAA.

Investors' anxieties were heightened by reports of potential escalations in the Middle East. These fears were amplified by news that the U.S. had prepared plans for additional strikes following the midterm elections and had ordered non-essential personnel and their families to evacuate Saudi Arabia.

President Trump commented on the situation Thursday, accusing Iran of fabricating incidents involving ships in the Strait of Hormuz. He suggested that Iran was intentionally manipulating oil prices to influence the U.S. midterm elections, stating in a social media post that the country was "making up fake hits, mines, and everything else" to drive up oil costs.

Iran's Islamic Revolution Guards Corps reported on Thursday that four vessels sustained damage and caught fire in the Gulf, while three other ships reportedly struck mines in the strait, according to a state-backed news agency. The Iranian army chief also reportedly indicated that the country's military is prepared for "asymmetric warfare" and has enhanced its capabilities.

Separately, market participants remained apprehensive about the ongoing tech sector sell-off, which has been exacerbated by major companies announcing significant spending plans for AI and the persistence of high interest rates. Shares of CoreWeave, a significant provider of AI cloud services, saw a 0.9% decrease on Friday, following a more than 10% drop the previous day. This "neocloud" sector has become a key indicator for technology firms investing heavily with the expectation of future AI-related revenues.

Some semiconductor stocks experienced a slight rebound by Friday morning, with AMD, Micron, and Nvidia recording gains of 1.9%, 3.5%, and 0.5%, respectively. The yield on the U.S. 10-year Treasury note edged up to 4.994%, and the 30-year yield rose to 5.317%, after both had fallen sharply on Thursday.