Wall Street pointed to a sharply divided open on Tuesday as a deepening retreat in semiconductor stocks fueled a sharp drop in Nasdaq futures. Technology shares bore the brunt of investor anxiety over the cost and payoff of massive artificial-intelligence spending, compounded by fresh signs of Chinese competition. Nasdaq 100 futures slid 0.83%, while S&P 500 futures shed 0.10%. In contrast, Dow futures added 145 points, or 0.28%, as money rotated toward industrial and financial names.
The sell-off originated in Asia, where South Korea’s Kospi index collapsed more than 10%, one of its worst sessions in years. Memory-chip makers SK Hynix (-14.7%) and Samsung (-13%) led the rout. Reports that a Chinese state-backed firm has begun mass-producing domestic deep-ultraviolet chipmaking equipment rattled investors, raising fears that lower-cost Chinese alternatives could erode the pricing power of long-dominant suppliers. US-listed shares of SK Hynix dropped 4%, TSMC fell 2.6%, and Nvidia slipped 1.1%. The Philadelphia Semiconductor Index fell more than 20% from its June record, meeting the definition of a bear market, while Roundhill’s memory-chip ETF slid 6.6% and remained below its 50‑day moving average for two weeks.
Compounding the pressure, sentiment around AI took another hit from reports that Nvidia is exploring a $250 billion funding backstop for OpenAI. Traders grew uneasy about the circular financing risks: if Nvidia funds the startup that buys its chips, the economics of AI demand become harder to justify. Deutsche Bank analyst Jim Reid captured the mood, noting “renewed worries over AI investment spending, and competition from cheaper Chinese companies, have triggered another selloff in global semiconductor stocks.”
Attention now shifts to Big Tech earnings, with Microsoft and Meta reporting after Wednesday’s close and Amazon and Apple on Thursday. The market will scrutinize cloud growth, capital expenditure levels, and any sign that AI products are generating revenue fast enough to offset the hundreds of billions earmarked for data centres and semiconductors. All four stocks traded only marginally higher before the bell, indicating reluctance to take large positions ahead of the results.
Adding to the uncertain backdrop, the Federal Reserve began its two-day policy meeting on Tuesday, with a rate decision due at 2 p.m. ET on Wednesday. Markets priced a 37.4% probability of an immediate rate increase, while still expecting at least 25 basis points of tightening by year-end. Oil fell 2.8% to a one-week low as US-Iran diplomatic talks eased supply fears, offering some inflation relief, though the calm remained fragile after fresh drone incidents in the region.
