The Dow Jones Industrial Average dropped 193 points, or 0.4%, and the Nasdaq composite tumbled 2.8%.
Weighing most heavily on the market was superstar stock Nvidia, one of Wall Street's most influential companies that's been leading the market for years. After initially rising at the open of trading following a better-than-expected profit report, Nvidia quickly slid to a loss of 8.5%.
Better-than-expected earnings reports have become routine for Nvidia, whose chips are powering the surge into artificial-intelligence technology, but this was the company's first since DeepSeek shook the entire AI industry.
After the Chinese upstart said it developed a large language model that can compete with the world’s best without using the most expensive chips, Wall Street had to question all the spending it assumed would go into Nvidia’s chips and the ecosystem that’s built around the AI boom, such as electricity to power large data centers.
Nvidia’s performance for the latest quarter, along with its forecasts for upcoming results, were “good enough to keep the debate moving in a positive direction,” according to analysts at UBS led by Timothy Arcuri.
But it apparently wasn’t enough to send Nvidia’s stock higher, particularly given criticism that its price had already leaped too high, too quickly. After more than tripling two years ago, Nvidia’s stock more than doubled last year as its sales exploded.
The market also soured on Salesforce, which fell 4% despite topping analysts’ profit expectations for the latest quarter. Several analysts called the performance solid, and the company continued to tout its AI offerings, but it gave a forecast for upcoming revenue that fell short of expectations.
One AI-related company bucking the trend was Snowflake. The AI data cloud company rose 4.5% after delivering stronger profit and revenue for the latest quarter than analysts expected.
It joined a range of stocks on the more staid end of Wall Street, ones that didn’t grab as many headlines as AI stocks in recent years. Despite the sharp loss for the overall S&P 500, close to 2 out of every 5 stocks in the index climbed.
A 1.7% rise for Berkshire Hathaway, the company run by famed investor Warren Buffett, was one of the strongest upward forces on the index. The owner of Geico, BNSF railroad and other businesses has built a hoard of unused cash recently. That could indicate Buffett, who's famous for buying stocks when prices are low, may not see much worth purchasing in a market that critics say looks too expensive.
Some investors have been waiting for other stocks to pick up the market’s leadership baton from Nvidia and the handful of big stocks that dominated for years. Nvidia alone accounted for a little more than 22% of the entire total return for the S&P 500 index last year.
All told, the S&P 500 fell 94.49 points to 5,861.57 Thursday. The Dow Jones Industrial Average dropped 193.62 to 43,239.50, and the Nasdaq composite tumbled 530.84 to 18,544.42.
In the bond market, Treasury yields swung following Trump's latest announcement on tariffs. He said "the proposed TARIFFS scheduled to go into effect on MARCH FOURTH will, indeed, go into effect, as scheduled" for imports from Canada and Mexico. He also said he would add an additional 10% tariff on Chinese products on that date.
Such moves could push up prices for U.S. households when inflation has already proven to be stubborn. Wall Street has been hoping the threats are merely leverage that Trump will use to negotiate with other countries before ultimately inflicting less pain on the economy than feared.
But even if that proves to be the case, all the talk on tariffs has already gotten U.S. households to feel more nervous about the economy. That's dangerous because their strong spending has been a main reason the U.S. economy has avoided a recession.
Such uncertainty also pressures the Federal Reserve, which has few if any tools to help an economy where growth is slowing and inflation is rising at the same time.
Jeff Schmid, president of the Federal Reserve Bank of Kansas City, said in a speech Thursday that he has “become more cautious” in his hopes that inflation will continue to ease. He also said that discussions with people in his district suggest “elevated uncertainty might weigh on growth” for the economy.
For now, at least, the U.S. economy appears to be in solid shape. The government on Thursday left alone its estimate for the U.S. economy's performance during the last three months of 2024, though it raised its estimate for a measure of inflation during the quarter.
A separate report said more U.S. workers applied for unemployment benefits last week. While the number is at a three-month high, it's still nowhere close to where it's been in past recessions.
In the bond market, the yield on the 10-year Treasury edged up to 4.27% from 4.26% late Wednesday.
In stock markets abroad, indexes were mixed across Europe and Asia. Germany’s DAX lost 1.1%, while Japan’s Nikkei 225 added 0.3%.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
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