Brent crude, the global benchmark for oil prices, rose 2.6% on Thursday to reach $111.66 a barrel, marking its highest level in five months. This increase occurred as artificial intelligence-linked equities declined, pulling down stock markets from Asia to the United States.
In New York, the Nasdaq Composite, an index heavily weighted toward technology firms, dropped 1.5% by mid-morning. The S&P 500, which tracks 500 of the largest US companies, lost 0.8% during the same period. Nvidia, currently the largest US company by market value, fell 2.3%. Because Nvidia holds a significant weighting in the S&P 500, its price movements directly impact index funds held in many retirement accounts.
The rise in oil prices is also affecting consumer costs. Gasoline prices increased by 9.1% in September alone, indicating that the same supply pressures impacting financial markets are already visible at the pump.
Asian markets experienced sharper declines on Thursday. South Korea's Kospi index fell 3.52% to close at 5,533.77, reversing a previous day's recovery. Japan's Nikkei 225 dropped 2.65%, and Hong Kong's Hang Seng Index lost 3.03%. In China, the CSI 300 index, which tracks 300 large companies listed in Shanghai and Shenzhen, entered a bear market after falling more than 20% from its recent peak.
This latest session follows a severe sell-off on Oct. 15, when the Kospi plunged 7.57% in a single session. Local media referred to that day as "Black Thursday," a term used because the drop triggered a circuit breaker, an automatic trading pause designed to slow panic selling. The Kospi remains more than 40% below its June peak.
Among individual US stocks, CoreWeave fell 3.8% on concerns regarding its debt levels. The company borrows capital to purchase Nvidia chips, which it then rents to other businesses through cloud services. Meta Platforms dropped 5.8% after reporting profits that missed market forecasts. Lam Research, a manufacturer of chipmaking equipment, slid 7.7% after guiding for profits slightly below analyst estimates.
Ken Griffin, founder of Citadel, stated on Tuesday that investors are "almost certainly" in an AI bubble. Griffin compared AI chips to airline seats, noting that once purchased, the marginal cost of running them is low, which can lead to price collapses if supply exceeds demand. While Griffin did not advise investors to sell, his comments stand in contrast to the generally positive market sentiment that has persisted since the launch of ChatGPT in 2023.
The Federal Reserve is scheduled to make its next interest rate decision on Oct. 28. Market participants are pricing in approximately a 15% probability of another rate hike at that meeting, with a December increase still widely expected. A rate hike would raise the cost of borrowing, which could further pressure equity markets.
Additional economic data points are approaching that may influence market direction. Core PCE inflation data, a price measure that excludes food and energy costs, is scheduled for release on Oct. 29. October payroll figures are expected to arrive on Nov. 6.