US stocks closes lower as AI funding jitters drag tech stocks

WALL Street’s main indexes closed lower on Wednesday, with the S&P 500 and the tech-heavy Nasdaq sinking to three-week lows as nagging worries about the artificial intelligence trade weighed on technology stocks.

Oracle dropped after a report said the cloud company’s largest data centre partner Blue Owl Capital will not back a US$10 billion deal for its next facility.

Amazon.com fell slightly after reports said the company is in talks to invest about US$10 billion in ChatGPT maker OpenAI.

Worries about the broader technology sector taking on more debt to develop artificial intelligence have discouraged risk-taking lately.

“There’s percolating anxiety about the AI trade. ... The primary driver is the level of capex and circular nature of some of the spending with OpenAI being at the center of that,” said Ross Mayfield, investment strategist at Baird Private Wealth Management.

“The broader question heading into the New Year is about the sustainability and return on investment of all this spending,” he said.

AI bellwether Nvidia and chipmaker Broadcom both fell, sending a broader chips index down.

According to preliminary data, the S&P 500 lost 78.52 points, or 1.15 per cent, to end at 6,722.22 points, while the Nasdaq Composite lost 415.97 points, or 1.80 per cent, to 22,695.50. The Dow Jones Industrial Average fell 225.85 points, or 0.47 per cent, to 47,888.41.

Alphabet shares fell after a Reuters report said its Google unit is taking on a new initiative to erode Nvidia’s software advantage, and working with Meta to do so.

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Meanwhile, Google-owned YouTube announced that the Oscar awards will stream exclusively on the platform for free globally and on YouTube TV starting in 2029.

In other media news, Warner Bros Discovery’s board rejected Paramount Skydance’s US$108.4 billion hostile bid for the media company, favoring Netflix’s binding offer.

Netflix shares rose, while Paramount and Warner Bros fell.

Energy stocks rose along with crude prices as US President Donald Trump ordered a “blockade” of all sanctioned oil tankers entering and leaving Venezuela. ConocoPhillips and Occidental Petroleum both gained.

Offering some relief for investors was Federal Reserve Governor Christopher Waller, often viewed as a dove on monetary policy. He said the central bank still had room to cut interest rates against a softening jobs market.

The next significant report will be Thursday’s consumer inflation data by the Commerce Department. REUTERS

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