AI stocks sell-off explained: what Nvidia and Meta's falls mean

Shares in the big companies behind today's AI boom fell sharply on 22 October, and the drop spread to stock markets around the world. Even so, most US stocks went up.

According to an AP report carried by BNN Bloomberg, the S&P 500, an index that tracks 500 large US companies, fell 1.2% to 7,663.43. That was its worst day since July. The Nasdaq Composite, which is heavy with tech firms, dropped 2.6% to 26,008.86. The Dow rose 11.89 points to 52,867.98.

Two of every three S&P 500 stocks rose, but losses at big tech companies masked those gains. The main moves were:

Markets abroad also fell. South Korea's Kospi lost 3.5%, Hong Kong's Hang Seng 3% and Japan's Nikkei 225 2.7%. France's CAC 40 fell 1.4%.

Oil added to the unease. Brent crude, the international benchmark, rose 4% to $113.17, its highest in five months, amid uncertainty over the war with Iran. The 10-year Treasury yield, a measure of government borrowing costs, fell to 4.97% from 5.13%.

The report says AI-related stocks have been swinging on worries that their boom may be under threat. Analysts cited in related coverage point to the rising cost of borrowing to build data centres and buy chips.

The reports don't say that any AI tool, price or service will change. Nothing in them points to effects on the apps you use.

What they do show is that investors are paying close attention to how AI companies pay for their growth. Meta's plan for a new stock class and CoreWeave's debt for Nvidia chips are both examples of that spending being funded in ways that worry some investors.

If you hold shares, or a pension or fund that tracks the S&P 500 or Nasdaq, those indexes did fall. The broader picture was mixed, though, since most S&P 500 stocks rose.

The reports don't say where AI shares go from here. The things to watch, based on what was reported, are further company results, the cost of borrowing for data centres and chips, and oil prices amid the war with Iran.