US stocks opened lower as risk-off sentiment swept through markets and fintech Block Inc.’s massive layoffs fanned angst that artificial-intelligence is poised to upend broad sections of the economy.
A larger-than-forecast 0.5% increase in producer prices last month, fueled by services, also weighed on equities by signaling inflationary pressures that may keep the Federal Reserve from cutting interest rates. Nvidia Corp., the heaviest-weighted stock in the S&P 500, extended its post-earnings decline.
The S&P 500 Index 0.9% at 9:45 a.m. in New York. The Nasdaq 100 Index fell 0.7%. Nvidia shares shed 2.3%. The Vix Index rose to 21.33.
Nvidia’s two-day drop came despite rising revenue and a better-than-expected first-quarter outlook, undescoring concerns about the high valuations of stocks that have surged on the back of the AI boom.
The “positive earnings surprises weren’t on the scale of what markets got used to in 2023-2024, and arrived amidst growing scepticism about the AI trade in general,” Deutsche Bank strategist Jim Reid wrote in a Friday morning note.
Even as investors fret over whether the AI boom has pushed up some stocks too far, the steady rollout of AI programs has caused them pull back from industries that look likely to be upended by the technology.
That risk was fanned on Thursday when Jack Dorsey’s Block said it was cutting 4,000 employees, reducing its workforce by nearly half, in a bet that AI can increase productivity. Block surged 15%.
Meantime, OpenAI will raise $110 billion in new investment at a $730 billion pre-money valuation. Investment includes $30 billion from Nvidia, $30 billion from SoftBank and $50 billion from Amazon.com Inc. OpenAI CEO Sam Altman said he doesn’t think his company’s fundraising deals look “circular” as long as revenue keeps growing. Amazon shares slipped 0.78%.
In deal news, Netflix Inc. jumped 8.9% after dropping out of the fight to buy Warner Bros. Discovery, clearing the way for rival bidder Paramount Skydance Corp. to clinch its $111 billion deal for the studio.
In earnings news, Dell Technologies Inc. shares soared 17% after the company’s AI servers sales outlook beat estimates, a sign of robust demand. Autodesk Inc. climbed 3.78% after guidance beat estimates. AI datacenter company CoreWeave Inc. tumbled 16% after reporting a bigger-than-anticipated loss, signaling heavy spending.
Energy stocks climbed as oil rose with a massive deployment of American forces in the Middle East keeping the market on edge.
“The US has not deployed as many military assets to the Middle East since 2003, and to-date Washington has never stood down after such a large buildup,” RBC Capital Markets strategist Helima Croft writes in a note. That poses risk of a “Chekhov’s armada situation, in which the presence of such substantial military assets creates an inexorable momentum to use them.”
Exxon Mobil Corp. advanced 1.34%. Shares of airlines and cruise ship operators were lower, as any conflict threatens to raise the cost of fuel and snarl consumers’ travel plans.
A message from Advisor Perspectives and VettaFi: Discover something new! Click here to register for our upcoming webcasts.
Bloomberg News provided this article. For more articles like this please visit
bloomberg.com.
