Slumping AI stocks drag Wall Street lower, oil prices jump as US launches more airstrikes on Iran

Wall Street fell Friday as AI-related stocks slumped, with chipmakers like Nvidia and Micron dropping 2-3% in premarket trading, while oil prices jumped after the US launched more airstrikes on Iran. The sell-off was driven by profit-taking and concerns over AI sustainability, exacerbated by China's Moonshot releasing a low-cost AI model that could reduce demand for computer chips.

Wall Street was on track to close the week with losses on Friday as the sell-off of chipmakers and other AI-related shares again dragged markets lower. Futures for the S&P 500 declined 0.8% while futures for the Dow Jones Industrial Average were down 0.5%. Nasdaq futures tumbled 1.6%. Most computer chipmakers — including Micron, Nvidia, Broadcom and Qualcomm — were down between 2% and 3% in premarket trading. Intel slid 3.4%. Stocks related to artificial intelligence https://apnews.com/hub/artificial-intelligence have been under pressure for weeks because of worries that their prices have shot too high and that voracious demand for computer memory and processors may not be sustainable if AI ends up not producing as much profit and productivity as promised. "Now investors are taking profits from the first-half winners and moving toward areas that were left behind," Stephen Innes, of SPI Asset Management, said in a commentary. The announcement of a new Chinese open-sourced AI model https://apnews.com/article/china-ai-tech-chips-xi-us-df4cfc7e1b260e765b5449b6d71a48e5 by startup Moonshot, Kimi K3, further shook up markets. Similar to when China's DeepSeek https://apnews.com/article/deepseek-ai-china-gpt-v4-d2ed33f2521917193616e061674d5f92 announced its AI model in early 2025, another low-cost rival to big Western AI models like ChatGPT and OpenAI could potentially hurt demand for computer chips and other components that have greatly benefited from rapid adoption of AI. SpaceX, Elon Musk's rocket company which also owns xAI, was down 4.5% after it aborted the launch of its mega Starship rocket. Starship came within a second or so from blasting off on a test flight Thursday, but some of the engines failed to ignite, triggering a launch abort amid billowing clouds of smoke and vapor. Netflix slumped more than 11% overnight after the video streaming company's forecast for the current quarter fell below Wall Street's expectations. The California company on Thursday reported better second-quarter profit than expected, but revenue fell short of analyst targets. In Asia, South Korean markets were closed, but shares in Taiwan fell 6.5% a day after its TSMC, https://apnews.com/article/taiwan-tsmc-chipmaking-ai-arizona-fab-ba05b1b952257d371acb9d070e7914ff the world's biggest contract manufacturer of computer chips, announced it plans to spend an extra $100 billion on building fabrication plants in the U.S. TSMC dropped 7.3% on Friday. Tokyo's Nikkei lost 4% to 64,141.12, at times trading near its lowest level in over a month, as shares in memory maker Kioxia slumped 16.1%. Computer chip equipment maker Tokyo Electron sank 8.2%. Chip testing equipment maker Advantest tumbled 7.2%. SoftBank Group, which has invested tens of billions of dollars in AI-related businesses, shed 9%. The Hang Seng in Hong Kong gave up 2% to 24,505.38, while the Shanghai Composite index lost 3.1% to 3,764.15, dipping to its lowest level in nearly 11 months.