Wall Street Ends a Bruising Week Lower as AI Doubts and Oil Prices Rattle Investors
Wall Street's main indexes closed lower on Friday, capping a turbulent week in which investors questioned how long the artificial intelligence spending boom can run, oil prices climbed to multi-month highs, and attention turned to a heavy week of corporate earnings and a Federal Reserve policy meeting.
The Dow Jones Industrial Average fell 652.82 points, or 1.23 percent, to 52,215.16. The S&P 500 lost 39.75 points, or 0.52 percent, to 7,623.68, and the Nasdaq Composite slipped 53.52 points, or 0.21 percent, to 25,955.34. Friday's losses were modest compared with Thursday, when the tech-heavy Nasdaq suffered its biggest one-day drop since June as concerns flared over the financing costs of heavy AI investment. Technology shares steadied somewhat on Friday, with the S&P 500 technology sector gaining 0.35 percent, but most sectors fell, including declines of more than 1 percent for consumer staples, consumer discretionary and financial stocks.
For the week, the S&P 500 fell 0.5 percent and the Nasdaq dropped 0.7 percent. The blue-chip Dow managed a 0.4 percent weekly gain, its third in a row.
AI spending under the microscope
The week's unease centred on the market-defining AI trade. Investors are increasingly asking when the enormous capital spending on data centres and chips will translate into earnings, and how it is being financed. "There is still fallout from the questioning of the AI trade," said Kristina Hooper, chief market strategist at Man Group. "There's certainly the potential that we see less invested in an AI data center build-out next year than has been projected. So I certainly think that's giving pause."
That question now heads into earnings season. About a third of S&P 500 companies are scheduled to report quarterly results next week, including Alphabet, Microsoft and Amazon — three of the biggest AI spenders, known as hyperscalers — whose capital expenditure forecasts will be closely watched for any sign of a slowdown. Separately on Friday, Reuters reported that SK Hynix had shelved a U.S. initial public offering for its California-based NAND flash memory subsidiary Solidigm, citing market volatility and a broad correction in semiconductor stocks.
Telecoms sink, energy climbs
Friday's sharpest moves came elsewhere. Telecommunications stocks tumbled after a report that SpaceX is seeking thousands of cell sites for a fourth U.S. wireless carrier. Shares of AT&T and T-Mobile sank nearly 8 percent, while Verizon shed 1.2 percent. Cell tower operators were the mirror image of the trade, with Crown Castle up 9 percent and American Tower up 4 percent, while SpaceX shares rose 1.9 percent.
Energy stocks, meanwhile, rose 2.5 percent to a record high. Brent crude hit its highest level since late April after attacks attributed to Yemen's Houthi movement in Saudi Arabia stoked concern about further disruption to energy supplies from the Middle East. Higher oil prices add a complicating factor for investors, since they can feed inflation just as the Federal Reserve weighs its next move on interest rates.
Why it matters, and what comes next
The week captured the market's two competing stories: a technology boom whose price tag is starting to make investors nervous, and an energy market being pushed up by geopolitical risk. Next week will test both. The hyperscalers' spending plans could either calm or deepen doubts about the AI trade, and the Federal Reserve's policy meeting will give investors a fresh read on how officials balance growth against the inflationary pressure of $100-range oil. For households, the stock swings matter beyond portfolios: they feed into retirement accounts, borrowing costs and the consumer confidence that underpins spending.
Reporting based on Reuters market coverage.