US stocks closed sharply lower on Wednesday, with the Nasdaq leading market declines as hotter-than-expected inflation data renewed investor anxieties regarding potential interest rate hikes by the Federal Reserve. The economic data dealt a sharp blow to high-flying artificial intelligence stocks and other rate-sensitive market sectors.
The tech-heavy Nasdaq Composite dropped 1.85% to close at 26,701.48, while the broader S&P 500 fell 1.08% to finish at 7,721.49. Meanwhile, the Dow Jones Industrial Average edged down 0.09% to 51,621.48. Trading volume on US exchanges remained relatively heavy, with 18.0 billion shares traded compared to the previous 20-session average of 17.6 billion shares.
Impact on Tech Stocks and AI Infrastructure
Increased market bets that the central bank will need to implement further rate hikes to tame inflation heavily penalized several of the year’s top-performing equities. Artificial intelligence infrastructure firms and prominent technology names experienced steep losses during the session.
Oracle shares tumbled 8.8%, while AI infrastructure providers CoreWeave and Nebius dropped 15% and 10%, respectively. Additionally, server manufacturers Dell and Hewlett Packard Enterprise sank 11.4% and 8.2% after Barclays downgraded both AI server makers from “overweight” to “equal-weight.”
Broader Market Performance and Sector Pressures
Despite Wednesday’s pullback, the S&P 500 remains up more than 12% for the year after hitting a record high the previous week, with a significant portion of those gains previously fueled by AI-related momentum. However, market breadth reflects underlying caution; the median S&P 500 stock has gained just 4% in 2026, and more than 200 index components remain in negative territory.
Financial institutions also faced downward pressure. Bank of America shares declined following a lower third-quarter profit driven by a $1.2 billion regulatory fine for failing to detect potential money laundering. Morgan Stanley shares also dropped despite reporting an increase in quarterly profit.
