AI Disruption and Inflation Fears Drive Market Selloff and Oil Price Surge

U.S. stocks are in a tailspin on Friday as Wall Street continues to punish companies that could be left behind in the artificial-intelligence revolution. A bleak inflation update further dampens the market, while oil prices climb amid tensions between the U.S. and Iran.

Market Reactions to AI and Inflation

The S&P 500 drops by 0.4%, marking only its second losing month in the past ten. The Dow Jones Industrial Average plummets by 521 points, or 1.1%, and the Nasdaq composite falls by 0.9%.

Investors are targeting software companies and other businesses they believe could be outpaced by AI-powered competitors. Block, the company behind Cash App and Square, announces a nearly 50% workforce reduction, despite a strong year. Jack Dorsey, Block's Chair, says, “Intelligence tools have changed what it means to build and run a company. A significantly smaller team, using the tools we’re building, can do more and do it better.”

Industry Impact and Future Outlook

Block’s stock surges by 16.8% after the announcement, but the broader market remains wary. Salesforce, which helps customers manage their relationships with clients, loses 2.3% of its value. Private-equity firms like Apollo Global Management and Blue Owl Capital, which have invested heavily in software companies, also see significant declines.

Even companies benefiting from AI-related demand, such as Nvidia, face pressure. Nvidia's stock drops by 4.2%, despite reporting better-than-expected profits and forecasting higher revenue for the current quarter. Rival chip companies follow suit, with concerns about whether the recent surge in stock prices is sustainable and if the massive spending on AI can continue.

Winners and Losers in the Market

Netflix emerges as a winner, climbing 13.8% after withdrawing its bid to buy Warner Bros. Discovery’s studio and streaming business. This move positions Paramount Skydance to take over the Hollywood rival, with Paramount Skydance shares jumping 20.8%. Meanwhile, Warner Bros. Discovery's stock falls by 2.2%.

Oil markets also experience volatility, with the price of benchmark U.S. crude rising by 2.8% to $67.02 per barrel. The increase is driven by geopolitical tensions, particularly between the U.S. and Iran.

References

• US stocks sink and oil prices rise as worries about AI, inflation and possible war hit Wall Street