Renewed inflation fears, plummeting consumer confidence and rising doubts about the payoff from artificial intelligence touched off a fresh round of heavy selling in stocks Friday.
The broad S&P 500 was down as much as 2%, while the tech-heavy Nasdaq fell nearly 3%. Those declines put both indices on pace for their fifth-weekly decline in six weeks, with the Nasdaq breaching its prior low for the year.
The Bureau of Economic Analysis reported earlier Friday that a reading of inflation favored by the Federal Reserve climbed more than expected in February, suggesting the central bank’s effort to keep interest rates higher to head off steeper price increases was running into resistance. A separate survey from the University of Michigan showed soaring inflation expectations among consumers as they continued to digest the threat from President Donald Trump’s tariffs strategy.
The same report showed a surge in forecasts for higher unemployment over the next year, while expectations of being better off financially in a year hence plummeted.
Those trends ran headlong into increasing concerns on Wall Street about the payoff from the massive investments in artificial intelligence that have occurred over the past two years or so and fuele some gains in the stock market.
Shares in chipmaker Nvidia were down nearly 2% Friday and is now down 27% from its January high, erasing some $1 trillion in value.
Earlier in the week, a Wall Street report alleged Microsoft had abandoned plans for new data center projects in the U.S. and Europe, suggesting the appetite for increased spending on AI was slowing. In a statement, Microsoft did not directly refute the report.
“Thanks to the significant investments we have made up to this point, we are well positioned to meet our current and increasing customer demand,” a Microsoft spokesperson said, adding that, last year, the company increased its capacity more than in any other year in its history.
“While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions,” the spokesperson said. “This allows us to invest and allocate resources to growth areas for our future.”
The Microsoft report came as the price sought for an AI-related initial public offering was trimmed. Reuters reported that cloud-computing group CoreWeave had slashed the proposed price range and number of shares to be sold in its planned IPO this week, and indeed the stock opened trading Friday below the target range it had sought.
“The market is getting squeezed by both sides. There is uncertainty around next week’s reciprocal tariffs hitting the major exporting sectors like tech alongside concerns about a weakening consumer facing higher prices hitting areas like discretionary,” said Scott Helfstein, head of investment strategy at Global X, told CNBC.
Helfstein added, however, that the news on inflation and consumer spending “was not that bad” and could simply represent a hiccup in near-term sentiment as investors struggle to understand the Trump administration’s new policies.
“Despite today’s selloff and broader market volatility of the past few weeks, there have not been big inflows into money markets. It seems like a lot of investors are trying to ride this out,” he said.
Pia Singh, CNBC and Sarah Min, CNBC contributed.
