Another sell-off for AI stocks drags Wall Street sharply lower

Trader John Bowers works on the floor of the New York Stock Exchange, Wednesday, June 3, 2026. (AP Photo/Richard Drew)

NEW YORK (AP) — Another sell-off for artificial-intelligence stocks is dragging Wall Street sharply lower. The S&P 500 tumbled 2.1 per cent Tuesday after erasing an early gain of 1 per cent and pulled further from its all-time high set a week ago.

The Dow Jones Industrial Average dropped 546 points, and the Nasdaq composite sank 3.5 per cent. Indexes swung lower as companies selling computer chips, memory and other building blocks of the AI boom broke from early gains to losses. The drops for AI stocks drowned out the benefit of lower oil prices, and most stocks in the S&P 500 actually rose.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

NEW YORK (AP) — Artificial-intelligence stocks are resuming their sell-off on Tuesday, and the former superstars that had led the market to records are dragging Wall Street down with them.

The S&P 500 dropped 1.5 per cent after erasing an early gain of 1 per cent and pulled further from its all-time high set a week ago. The Dow Jones Industrial Average was down 294 points, or 0.6 per cent, as of 12:15 p.m. Eastern time, and the Nasdaq composite was 2.5 per cent lower.

Indexes swung lower as companies selling computer chips, memory and other building blocks of the AI boom broke from early gains to losses. Micron Technology went from a jump of 4.2 per cent to a drop of 7.5 per cent, for example. That’s a day after it soared 9.9 per cent and two days after it plunged 13.3 per cent.

The computer memory company’s stock has already tripled so far this year, raising criticism that it’s gone too far, too fast. Following last week’s industrywide sell-off, the question is whether AI stocks broadly are heading for a long downturn or just needed a shake-out to get rid of excessive optimism.

Marvell Technology dropped 13.3 per cent, and Advanced Micro Devices sank 8.1 per cent after both AI winners also erased early-morning gains. Nvidia’s fall of 3.4 per cent was the single heaviest weight on the S&P 500 because the chip company is Wall Street’s largest company by value and thus its most influential.

The weakness for AI stocks drowned out the benefit Wall Street got from easing oil prices. More stocks in the S&P 500 actually rose than fell, despite the sharp drop for the overall index, as the price for a barrel of Brent crude oil sank 4.4 per cent to US$90.13. It had briefly topped US$98 the day before.

Oil prices have swung up and down as hopes fade and rise that the United States and Iran can reach a deal to reopen the Strait of Hormuz. A reopening would allow oil tankers to resume delivering crude from the Persian Gulf to customers worldwide.

The drop in oil prices helped stocks of airlines, which have been punished by soaring fuel costs. U.S. airlines spent more than US$6 billion on jet fuel in April, up 78 per cent from a year earlier, according to government data. American Airlines climbed 1.4 per cent, and Delta Air Lines added 1 per cent.

To make up for their higher fuel bills, airlines have been raising their own airfares. It’s part of the broad, painful acceleration of inflation hitting U.S. shoppers because of the war with Iran. The high oil prices are also pushing bond yields higher worldwide, raising the pressure on stock prices.

Treasury yields eased a bit Tuesday with the fade in oil prices. The yield on the 10-year Treasury fell to 4.52 per cent from 4.56 per cent late Monday. But it’s still well above its 3.97 per cent level from just before the war with Iran.

The latest monthly updates on U.S. inflation will arrive later in the week, with one on consumer prices coming Wednesday and one on wholesale prices coming Thursday.

Inflation is high enough, and the U.S. job market looks strong enough, that traders on Wall Street largely expect the Federal Reserve will have to raise its main interest rate at least once by the end of this year. Higher interest rates would keep a lid on inflation, but they would also threaten to slow economies and undercut prices for stocks and all kinds of other investments.

The average long-term U.S. mortgage rate has already recently climbed to its highest level in nine months, and high costs to borrow money could discourage the building of AI data centers that are fueling the U.S. economy’s growth.

On Wall Street, J.M. Smucker jumped 12 per cent after reporting a stronger profit for the latest quarter than analysts expected.

The company behind the Folgers, Hostess and other brands benefited from higher prices charged for coffee and sweet baked goods. It joined the long list of U.S. companies delivering stronger profit growth than analysts expected, which has helped drive the S&P 500 to record after record this year.

Nuvalent soared 39.6 per cent after GSK agreed to buy the biotech company for US$10.6 billion. The shares of U.K.-based GSK that trade in New York added 0.8 per cent.

In stock markets abroad, indexes mostly fell in Europe following bigger moves in Asia.

South Korea’s Kospi jumped 8.2 per cent and nearly recovered Monday’s plunge of 8.3 per cent. It’s been beholden to the performance of big tech stocks like SK Hynix and Samsung Electronics.

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AP Business Writers Matt Ott and Elaine Kurtenbach contributed to this report.

By Stan Choe