U.S. Defensive Sectors Lead as AI Stocks Extend Thursday’s Selloff

U.S. equities shifted toward defensive groups Thursday as another wave of selling hit AI-linked shares, while lower bond yields pointed to a flight to safety despite rising oil prices.

Health care and consumer staples led the S&P 500’s sectors, contrasting with weakness in chip and AI infrastructure stocks. Johnson & Johnson rose more than 2%, erasing its post-earnings decline, while Kimberly-Clark extended its gains. Procter & Gamble also reported a solid quarter. Bond yields fell despite higher oil prices, a pattern consistent with investors seeking safer assets.

The pullback came amid concerns about AI funding needs. Nvidia CEO Jensen Huang described a “scarcity of capital” for neocloud operators such as CoreWeave, while saying demand for computing power was “off the charts.” Lam Research added pressure on chip shares after its current-quarter outlook disappointed. Micron, Intel and Qnity shares also fell.

Meta Platforms dropped nearly 6% despite reporting strong revenue growth Wednesday night and presenting an upbeat view of its Muse AI agent business. The company is creating a nonvoting share class likely to help finance its AI expansion. Portfolio director Jeff Marks called the share-class plan a possible “overhang.” The decline erased most of Meta’s gains after Muse launched Sept. 8.

The reversal was sharp among data center-related companies. SpaceX’s comments Wednesday on AI demand and supply constraints had lifted GE Vernova and other companies tied to the data center buildout. GE Vernova, whose gas turbines support that expansion, fell almost 10% Thursday, reversing the previous session’s gains.