Critics say AI investment is primarily the one sector of the Trump economy that is still managing to grow, even as manufacturing, construction and other market elements either slump or take a nosedive.
But now, market analysts see even AI entering a lurch.
The S&P 500 ended higher on Thursday, but only after bouncing back from early losses as investors fretting about AI dumped their stocks and fled to healthcare sectors like Eli Lilly, UnitedHealth and consumer stocks.
Drugmaker Eli Lilly gained more than 3 percent, UnitedHealth added 2.8 percent and Walmart rose 1.4 percent, but Yahoo Finance reports those three companies “were heavy contributors to the S&P 500's gain for the session.”
Meanwhile, AI-related companies like Nvidia dipped 1.8 percent after chip manufacturer TSMC struck a cautious note on AI-driven demand. Similarly, Dell Technologies dropped 6.9 percent and Hewlett Packard Enterprise fell 7.1 percent, with both server heaping up sharp losses in the related to worries about AI companies exposing themselves to higher borrowing costs.
The S&P 500 Index closed at an all-time high last week, but critics say it only managed that on the strength of a handful of companies focused on the booming artificial intelligence sector, which Bloomberg analyst Jonathan Levin said is “papering over signs of growing vulnerabilities in the economy and financial markets.”
It does not help that wholesale inflation numbers hit the highest in four years, according to CNN
“With the midterm elections less than a month away, what Trump sees as an asset for Republicans may in fact be a liability,” Levin added. If the only vigorous branch of Trump’s economic tree breaks much of the market could suffer. The economy, warned Levin, is actually “reeling from inflation that remains stubbornly high and unchecked fiscal budget deficits” while average hourly earnings adjusted for inflation have been losing ground for five months.
And now “several technology stocks fell on Thursday, as investors scrutinized AI-related companies whose debt loads leave them vulnerable to rising interest rates,” reported Yahoo Finance.
Nasdaq futures fell by more than one percent, said Bloomberg, which continues a pattern of selling off AI‑related equities as investors worry that higher borrowing costs could choke the sector’s rapid expansion.
The nature of Trump’s wobbly economy and voters’ continued frustration with it, be the reason for Trump’s “panic tour, a zigzagging route through a number of toss-up states … so ambitious that it makes my body tired just reading down the list,” said Bloomberg reporter Jessica Karl, adding that Trump “managed to rack up a year’s worth of frequent-flier miles in mere weeks.”
“Yet all that effort might not be enough to eke out a win,” said Karl.