US stocks fall as inflation accelerates; S&P 500 drops 1.1%, Nasdaq slides 1.6%


US stocks fall as inflation accelerates; S&P 500 drops 1.1%, Nasdaq slides 1.6%
Investors also weighed the risks and potential returns of heavy investment in artificial intelligence infrastructure.

Wall Street stocks fell on Wednesday as hotter-than-expected US inflation data pushed Treasury yields higher, adding to concerns about borrowing costs even as major banks assessed the opportunities and risks associated with the artificial intelligence (AI) investment boom.The S&P 500 fell 1.1%, putting it on track for its fifth decline in six sessions since hitting a record high. The Dow Jones Industrial Average dropped 171 points, or 0.3%, while the Nasdaq Composite declined 1.6%, as of 1:14 pm Eastern time.US consumer prices rose 3.7% year on year in September, accelerating from 3.4% in August and exceeding economists’ expectations of 3.6%. The data fuelled concerns that inflation could remain elevated, partly due to rising energy prices amid the war with Iran.The benchmark 10-year US Treasury yield climbed to 5.23%, after briefly crossing 5.32% during the session. Higher yields can weigh on equities by increasing borrowing costs and making bonds more attractive relative to stocks.Meanwhile, executives at major US banks highlighted the opportunities presented by AI infrastructure investment, while cautioning that uncertainty over demand, financing costs and returns could create risks.Goldman Sachs CEO David Solomon said the long-term demand for capital and computing capacity required by the AI ecosystem remained uncertain.“No one knows how the demands for capital and compute will evolve as the broader AI ecosystem matures,” Solomon said, stressing the need for vigilance in financing decisions and risk management.Citigroup CEO Jane Fraser, however, said investment in the broader AI ecosystem was not slowing, citing an ongoing shortage of computing capacity.The AI infrastructure expansion, driven by heavy investment in data centres and computing power, presents banks with opportunities to finance large-scale projects. However, elevated interest rates could raise project costs, squeeze returns and make debt repayment more difficult.Wells Fargo CEO Charlie Scharf described the AI buildout as a significant economic force, bringing both opportunities and risks because of the substantial borrowing involved and pressure on prices across some industries and supply chains.Banks are also deploying AI internally to improve productivity and reduce costs, although the financial benefits vary. Fraser said Citi was developing products up to 40% faster using AI and had reduced technology vendor expenses by 30% through coding tools.Investors are watching whether such efficiency gains can justify the heavy spending on AI. Concerns are also mounting over cybersecurity threats and the risks posed by AI agents capable of taking actions autonomously.The combination of persistent inflation, elevated bond yields and uncertainty over AI investment returns has added to the challenges facing Wall Street, where high stock valuations leave limited room for corporate earnings or productivity gains to disappoint.



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