Stan Choe
Updated ,first published
US stocks are dropping as the market splits further between perceived losers and winners from the rush into artificial-intelligence technology.
The S&P 500 fell 1 per cent after erasing an early gain that brought it just below its all-time high. The Dow Jones Industrial Average was down 494 points, or 1 per cent, and the Nasdaq composite was 1.5 per cent lower.
The Australian sharemarket is set to dive, with futures pointing to a fall of 78 points, or 0.9 per cent, at the open. The ASX advanced 0.3 per cent on Thursday. The Australian dollar was weaker at US70.83¢ at 5.16am AEDT.
Reporting season continues with Nick Scali and Cochlear among those due up while Westpac released a trading update.
Banking giant said it made $1.9 billion in net profit in the December quarter, which was 5 per cent higher than the quarterly average during the September half. Amid stiff competition in retail banking, Westpac said its net interest margin, which compares funding costs with what it charges customers, had fallen 3 basis points to 1.79 per cent. The Sydney-based bank said there had been a fall in impaired loans – a trend also seen at Commonwealth Bank.
“We are optimistic on the outlook for the economy and expect demand for both business and household credit to remain resilient. Our strong financial foundations provide us with the stability and capacity to support our people, customers, shareholders and the broader economy,” Westpac chief executive Anthony Miller said.
On Wall Street, AppLovin tumbled 18.1 per cent despite reporting a stronger profit for the latest quarter than analysts expected. Like other software companies, it’s come under pressure recently from worries that AI may undercut its business while fundamentally changing how people use the internet.
AppLovin CEO Adam Foroughi pushed back on such worries, saying in a conference call with analysts that indicators show his company is doing well. “There’s a real disconnect between market sentiment and the reality of our business,” he said.
Its stock nevertheless worsened its loss for the young year so far, which came into the day at 32.2 per cent.
Cisco Systems dropped 11.5 per cent despite likewise topping analysts’ expectations for profit and revenue last quarter. The tech giant indicated that it may make less profit off each dollar of revenue during the current quarter than it did in the past quarter.
Analysts said that could be an indicator of higher prices for computer memory that everyone is having to pay amid the rush driven by AI.
More broadly, questions are rising about whether businesses that are spending heavily on AI will end up seeing high-enough profits and productivity to make the investments worth it.
In the meantime, the companies serving customers with huge AI budgets are benefiting.
Equinix, for example, jumped 11.8 per cent even though the digital infrastructure company’s results for the latest quarter fell short of analysts’ expectations. It gave financial forecasts for 2026 that topped analysts’ expectations, and CEO Adaire Fox-Martin said that “demand for our solutions has never been higher.”
The company’s data centres are helping to power the world’s move into AI.
Outside of tech, McDonald’s rose 2 per cent after reporting a stronger profit for the latest quarter than analysts expected. The restaurant chain credited moves to improve its value and affordability, including cutting prices on some US combo meals in September.
Walmart’s rally of 3.2 per cent, meanwhile, was one of the strongest forces pushing upward on the S&P 500. It erased losses from earlier in the week after a report said spending at US retailers overall stalled in December.
In the bond market, Treasury yields fell after a report said slightly more US workers filed for unemployment benefits last week than economists expected.
The number was nevertheless lower than the prior week’s, which is a signal that the pace of layoffs may be improving. It also followed a surprisingly strong report on the job market from Wednesday, which said the nation’s unemployment rate improved last month.
A strengthening job market could push the Federal Reserve to keep its cuts to interest rates on pause, even if President Donald Trump has been loudly and aggressively calling for lower rates. That’s because lower rates can worsen inflation at the same time that it gives the economy a boost.
It all raises the stakes for Friday’s upcoming report on inflation at the US consumer level. Economists expect it to show inflation slowed to 2.5 per cent last month from 2.7 per cent in December.
A separate report on Thursday said that sales of previously occupied homes slumped last month by more than economists expected, which also weighed on yields.
The yield on the 10-year Treasury fell to 4.12 per cent from 4.18 per cent late Wednesday.
In stock markets abroad, South Korea’s Kospi rushed 3.1 per cent higher thanks to gains for Samsung Electronics, SK Hynix and other tech stocks. The moves were more modest in other Asian markets and in Europe.
Hong Kong’s Hang Seng fell 0.9 per cent, and France’s CAC 40 rose 0.3 per cent.
AP
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