Wall Street drops to one of its worst days since April on worries about AI stocks and interest rates

The Dow Jones Industrial Average dropped 797 points, or 1.7%, from its record set the day before, while the Nasdaq composite lost 2.3%.

Nvidia was the heaviest weight on the market after the chip company fell 3.6%. Other stocks swept up in the artificial-intelligence frenzy also struggled, including drops of 7.4% for Super Micro Computer, 6.5% for Palantir Technologies and 4.3% for Broadcom.

Questions have been rising about how much higher AI darlings can go following their already spectacular gains. At the start of this month, Palantir was sporting a stunning rise of nearly 174% for the year so far, for example.

Such sensational performances have been one of the top reasons the U.S. market has hit records despite a slowing job market and high inflation. AI stock prices have shot so high, though, that they’re drawing comparisons to the 2000 dot-com bubble, which ultimately burst and dragged the S&P 500 down by nearly half.

In the meantime, stocks outside of AI also fell across Wall Street as traders worried that the Federal Reserve may not deliver another cut to interest rates in December, as many had been expecting.

Wall Street loves lower interest rates because they can goose the economy and prices for investments, even though they can also worsen inflation. A halt in cuts could undercut U.S. stock prices after they already ran to records in part on expectations for more reductions.

Expectations have come down sharply in recent days that the Fed will cut its main interest rate for a third time this year. Traders now see roughly a coin flip’s chance of that, 51.9%, down from nearly 70% a week ago, according to data from CME Group.

Recent comments from Fed officials have helped drive the doubt.

Susan Collins, president of the Federal Reserve Bank of Boston, said late Wednesday that it’s likely appropriate to leave interest rates steady “for some time.” That was a turnaround from a speech last month, when she supported another cut.

The Fed’s job became more difficult recently because of the U.S. government’s shutdown, which delayed updates on the job market and other signals about the economy. That left it less certain about whether the slowing job market or high inflation is the bigger threat.

The stock market mostly rose through the U.S. government’s shutdown, as it has often done historically, but Wall Street is bracing for potential swings as the government gets back to releasing those updates. The fear is that the data could persuade the Fed to halt its cuts to rates.

The “looming data deluge may spur additional volatility in the coming weeks,” according to Doug Beath, global equity strategist at Wells Fargo Investment Institute.

On Wall Street, The Walt Disney Co. helped lead the market lower after falling 7.7%. The entertainment giant reported profit for the latest quarter that topped analysts’ expectations, but its revenue fell short.

That helped offset a jump of 4.6% for Cisco Systems after the tech giant delivered profit and revenue that were bigger than analysts estimated.

Another one of the relatively few stocks to rise was Berkshire Hathaway, the company run by famed investor Warren Buffett. He is known for loving bargains and won’t buy stocks when he considers them too expensive. Berkshire Hathaway rose 2.1%.

All told, the S&P 500 fell 113.43 points to 6,737.49. The Dow Jones Industrial Average dropped 797.60 to 47.457.22, and the Nasdaq composite sank 536.10 to 22,870.36.

In the bond market, Treasury yields pushed higher, which put downward pressure on prices for stocks and other investments.

The yield on the 10-year Treasury rose to 4.12% from 4.08% late Wednesday.

In stock markets abroad, indexes sagged in Europe following modest gains in Asia.

Tokyo’s Nikkei 225 index rose 0.4%, even as Japanese tech giant SoftBank Group lost another 3.4%. It’s been struggling since it said earlier this week that it had sold all of its $5.8 billion stake in Nvidia.

Another loser was bitcoin, whose price fell back below $99,000. It had been nearing $125,000 last month.

AP Writers Teresa Cerojano and Matt Ott contributed.