Stan Choe, AP Business Writer
NEW YORK (AP) — US stocks fell sharply on Thursday, feeling the painful drawbacks of high expectations led by AI Superstars.
The S&P 500 has reopened its slide after a 1.4% decline in noon trading and a mini recovery from the previous day helped to retreat some of the sharp declines over the last few weeks. The Dow Jones industrial average was 375 points (0.9%) as of 11:55am Eastern time, while the Nasdaq Composite was 1.8% lower.
Semiconductor companies and their suppliers have been particularly heavy in the market after they have soared to incredible heights due to the frenzy of artificial intelligence technology.
Marvell Technology fell 17.2% despite reporting results from the most recent quarter that surpassed previous analyst forecasts. He also said he expects to see even a small increase in revenue for the current quarter, which is more than 60% from the previous year.
However, that was not enough for investors who have grown by abandoning their expectations of AI-related companies.
Nvidia, the poster child of the AI boom, fell 3.8%, while Broadcom lost 5% more than revenue reports arriving after trading closed that day. They were two of the three heaviest weights of the S&P 500.
AI Superstars have dominated Wall Street for many years, helping to record after the record. However, critics have said these rising performances, including Nvidia’s nearly 820% surge from 2023 to 2024, are too expensive. They are also facing threats as Chinese companies develop their own AI products, and Deepseek famously says there is no need to use the most expensive chips in the industry.
The rise in scrutiny of AI winners is hitting the market when concerns about President Donald Trump’s tariffs and weaker than expected US economy are already high.
Trump on Thursday gave him a month’s reprieve from 25% tariffs on most goods from Mexico after a conversation with President Claudia Sinbaum. It followed him after giving a month’s exemption on Wednesday for the US automaker on his strict new tariffs on Mexican and Canadian imports.
The move brings back a revival on Wall Street where Trump uses tariffs as merely a tool for negotiations and ultimately he can shatter the economy and avoid the worst trade war that will bring higher inflation.
But Trump is still moving forward with other tariffs scheduled to take place on April 2. And the mid-way back and forth movements over tariffs have increased the uncertainty that has already upset the market. It was Monday when Trump said “there are no rooms” due to negotiations that could lower tariffs in Mexico and Canada, which came into effect Tuesday.
According to a strategist at BNP Paribus, “it depends heavily on whether these new tariffs are temporary or toned down.” “But even if they are ultimately removed, we expect lasting damage to global economic activity.”
While US households are already pretending to be higher inflation due to tariffs, US businesses say they are facing “chaos” due to all the uncertainty that comes out of Washington.
Such a report raised the possibility of the worst-case scenario known as “stagflation.” The economy is often stagnant and inflation is high, and Federal Reserve policymakers don’t have a good tool to fix it.
This draws Wall Street attention in a report coming Friday from the U.S. Labor Bureau, showing how many workers employed by US employers last month. So far, the solid job market that has allowed solid spending by US households has been a lynching pin to prevent the recession.
Some major retailers have recently provided warning signals about how much US consumers can maintain their spending.
Macy’s reported on Thursday that revenues were slightly weaker at the end of 2024 than analysts expected, but their profits were above expectations. It also gave a forecast of profits that have not reached analysts in 2025. The stock fell 1.2%.
This was similar to Victoria’s secrets that beat Wall Street’s fourth quarter sales and profit forecasts, but gave them a revenue forecast for next year, which reached analyst expectations. That inventory fell 4.4%.
In overseas stock markets, most indexes rose in Europe after the European Central Bank cut interest rates, as is widely expected by the European Central Bank.
German stocks won 1.5% as the market continues to feel reverberation from the agreements by the two parties that will form the country’s next government to ease constitutional restrictions on borrowing. This is a major shift in German budget policy, paving the way for new borrowing and spending over the next decade.
Stock prices have also risen in Asia, including a jump of 3.3% in Hong Kong and 1.2% in Shanghai.
China’s commerce minister said Thursday that its country will not succumb to bullying and its economy will survive higher tariffs imposed by Trump, but he added that “there are no winners in the trade war.”
In the bond market, 2010-year financial yields rose from 4.28% to 4.30% in the second half of Wednesday.
Contributors were made by AP business writers Matt Ott, Elaine Kurtenbach and Christopher Rugaber.
Original issue: March 6, 2025, 10:54am EST
