Apple Slides 1.9% as AI Chip Costs Hit Profit, While Nvidia Lifts S&P 500
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Apple's stock fell 1.9% on Tuesday after the company said the soaring cost of memory chips will eat into its profit, even as gains for Nvidia and other AI-linked stocks nudged the broader U.S. market higher, according to The Associated Press.
The S&P 500 rose 0.4% even though most stocks in the index fell. The Dow Jones Industrial Average dropped 0.4%, and the Nasdaq composite climbed 0.8%. The market moved as voters cast ballots in the midterm elections.
What it means when AI demand reaches Apple's costs
Apple has long been seen on Wall Street as a Big Tech company less dependent on artificial intelligence. The AP reported that the AI boom is reaching it anyway. Memory chips for computers have become more expensive because of demand from the rush to build AI data centers, and those costs are hitting Apple.
The company said it expects to make less profit from each $1 of its revenue in the final three months of this year. That outlook weighed on the stock even though Apple reported stronger profit and revenue for the latest quarter than analysts had expected.
For people with retirement savings or other money in broad stock funds, the day shows how heavily a few large technology companies can steer the market. A handful of big gainers offset declines in most other S&P 500 stocks.
The closing numbers
- The S&P 500 rose 27.52 points to 7,568.92. It hit a record high last month.
- The Dow fell 197.26 points to 51,786.72.
- The Nasdaq gained 207.65 points to 25,372.01.
- The 10-year Treasury yield rose to 4.96% from 4.91% late Monday.
- Brent crude settled at $103.60, down 1.1% from Monday, after swinging between above $107 and below $101 per barrel.
Who pushed the market up, and who held it back
Nvidia was the strongest force lifting the S&P 500, rising 2.3%. Broadcom gained 3.1%. Microsoft, Amazon and Meta Platforms, which are spending heavily on AI, each rose more than 2%. The AP noted that AI-related stocks had been shaky recently on worries that their prices had climbed too high. A day earlier, several of them flipped from morning gains to afternoon losses.
Palantir Technologies fell 1.6% despite a better-than-expected profit. The software company said it earned more from U.S. companies than from the U.S. government for the first time, with U.S. commercial revenue up 148% from a year earlier.
Several companies with stronger summer profits than analysts expected also gained. DuPont rallied 8.6%, one of the biggest gains in the S&P 500, and Celanese climbed 5%. Revvity rose 7.8% after topping expectations. CEO Prahlad Singh said end-market conditions are continuing to improve.
Jobs data, interest rates and oil
A government report showed employers advertised more job openings at the end of September than economists expected. That helped push up Treasury yields. The AP said expectations remain high for companies to keep growing profits as the economy moves ahead, despite high inflation and elevated interest rates.
Oil prices kept swinging amid uncertainty about the war with Iran, according to the AP.
What the election could mean for markets
The AP reported that the rising cost of living and AI were issues that crossed party lines in the midterms. Some on Wall Street speculate that a Democratic sweep of Congress could bring more regulation and restrictions on AI development. The AP noted that Donald Trump would still be president with veto power. Wall Street generally prefers split control of Washington, which it sees as carrying less risk of sweeping policy changes.
Brock Weimer, an analyst at Edward Jones, said that going back to 1970 the S&P 500 has posted a positive return in the six months after every midterm election.
Markets abroad
European indexes fell after a mixed finish in Asia. South Korea's Kospi dropped 3.6%, one of the world's sharpest moves, on losses for Samsung Electronics and SK Hynix. Australian stocks rose 0.3% after the country's central bank raised its benchmark interest rate for the fifth time this year.
