Dow flat, Nasdaq slumps as investors pull back from AI stocks

4:15pm: AI trade loses momentum

Wall Street ended sharply lower on Tuesday as investors pulled back from the artificial intelligence trade, sending technology and semiconductor stocks tumbling and dragging the broader market lower.

The Nasdaq led the declines, falling 580 points, or 2.2%, to 25,587 as heavyweight chipmakers came under pressure ahead of key earnings reports. The S&P 500 dropped 107 points, or 1.4%, to 7,365, while the Dow Jones proved more resilient, slipping just 46 points, or 0.1%, to 51,667.

The selloff was concentrated in the technology sector, where concerns about AI-related spending and lofty valuations weighed on sentiment. Chip stocks were among the hardest hit, with Nvidia falling more than 4%, while Micron Technology plunged more than 13% ahead of its quarterly results due Wednesday. AMD and Intel also posted steep declines as investors reassessed expectations for the sector.

The retreat in semiconductor shares marked a notable cooling of the AI-driven rally that has powered markets higher for much of the year, with traders taking profits and looking for fresh evidence that massive investments in artificial intelligence will continue to translate into strong earnings growth.

Investors will now turn their attention to earnings reports from FedEx and Cerebras after the closing bell, for further clues on corporate spending trends and the outlook for technology and logistics demand.

3:40pm: Proactive news headlines

• Virtuix Holdings Inc (NASDAQ:VTIX) launched Omni One for Quest, enabling its omnidirectional treadmill to work with Meta Quest 2 and Quest 3 headsets and expanding its reach through Meta’s XR ecosystem.

• Power Metallic Mines Inc (TSX-V:PNPN, FRA:IVV1, OTCQB:PNPNF) continues to advance its Lion Zone discovery at the Nisk project in Québec, with recent drilling results supporting resource growth and increasing confidence ahead of a maiden mineral resource estimate expected in July.

• Varon Corp (OTCID:OZSC)‘s Ballislife Drink Inc announced that Egypt Dean, the son of Alicia Keys and Swizz Beatz, has made a seven-figure investment in Ballislife HYDRO, becoming a strategic partner in the sports hydration brand’s national expansion.

• NEXE Innovations Inc (TSX-V:NEXE, OTC:NEXNF, FRA:FRA: NX5) said demand for its compostable coffee pod platform is accelerating as a distribution partner increases orders, adds brands and expands marketing efforts ahead of the peak sales season.

2:30pm: Market movers

• SpaceX Corp (NASDAQ:SPCX) shares rebounded 2.5% on Tuesday after a steep post-IPO selloff that erased more than $600 billion in market value, though the stock remains down nearly 16% from its recent debut.

• Carnival Corp (NYSE:CCL) shares dropped almost 6% after the cruise operator issued weaker-than-expected third-quarter profit guidance, overshadowing a second quarter that delivered record revenue and earnings above analyst forecasts.

• Oracle Corp (NYSE:ORCL, XETRA:ORC) said it reduced its workforce by about 21,000 employees over the past year, attributing the cuts in part to increased use of artificial intelligence across its business operations.

1:10pm: Oil falls, gold down

“The price of oil falls further – to around $73 per barrel – its lowest level in nearly three months, following the US and Iran’s signing of an interim peace deal and traffic through the Strait of Hormuz picking up again,” IG’s Axel Rudolph noted.

“Gold and especially silver – down around 4.5% on the day – are hit by increased US rate hike expectations and the greenback trading in one-year highs.”

11:55am: SpaceX moves higher

SpaceX Corp (NASDAQ:SPCX) (SpaceX Corp (NASDAQ:SPCX)) shares rose 2.5% on Tuesday, offering a partial reprieve after a brutal two-day selloff that wiped more than $600 billion from the rocket and satellite company’s market value and marked one of the most dramatic reversals ever seen in a newly listed mega-cap stock.

The rebound follows a near-16% decline since the company’s IPO earlier this month, pushing shares below their first-day opening price of $150 and threatening to pull the Elon Musk-led company’s market capitalization below $2 trillion.

“SpaceX shedding more than $600 billion in value and over 30% from its post-IPO peak marks one of the most dramatic reversals ever seen in a newly listed mega-cap stock, dragging the whole technology sector down with it,” said Axel Rudolph, chief technical analyst at IG.

Despite the turbulence, SpaceX shares remain roughly 10% above their $135 IPO price.

10:50am: Oracle to lay off more workers

Oracle Corp (NYSE:ORCL, XETRA:ORC) has reduced its workforce by about 21,000 employees over the past year, citing the deployment of artificial intelligence technologies across its operations, according to its annual filing.

The software and cloud company employed approximately 141,000 full-time workers at the end of May, compared with about 162,000 a year earlier, a decline of nearly 13%.

Oracle had informed employees in March that it planned to eliminate thousands of positions as it faced investor scrutiny over increased borrowing to support its AI infrastructure expansion. In January, the company announced plans to raise $50 billion through debt and equity financing.

Shares of Oracle traded down almost 3% at Tuesday’s opening bell, down about 13% so far this year.

10am: Nasdaq opens 1.2% lower

The Nasdaq has led an opening decline on Wall Street, slipping down 1.2% to add to yesterday’s 1.3% drop.

The S&P 500 has slid 0.9% and the Dow Jones dipped just 0.15% so far.

Biggest fallers on the S&P are concentrated in the stocks that have led the AI and semiconductor rally, almost entirely chipmakers, semiconductor equipment suppliers and AI infrastructure names.

SanDisk is down 12.3%, with Micron down 10.5%, Corning falling 10.2%, then Lam Research, Teradyne, Applied Materials, KLA and Seagate all down around 8% or more.

Other major semiconductor names including Qualcomm, ON Semiconductor, Texas Instruments, AMD, Analog Devices, Microchip, NXP, Super Micro and Intel are all down between 5% and 9%.

As for the Dow, Caterpillar fell almost 4%, with Nvidia down 2.45%, followed by Honeywell, Cisco and Goldman Sachs all down at 1% or more, indicating investors are also rotating out of broader cyclical and industrial exposures.

IBM, up 4%, topped the early Dow leaderboard, with Sherwin-Williams, Merck, J&J and Walmart next.

8.30am: Tech sell-off expected to deepen

US stocks looked set for a sharply weaker open on Tuesday as a sell-off in technology shares deepens across global markets.

Futures point to losses for the Nasdaq 100 of around 849 points, or 2.8%, while the S&P 500 is set to shed 1.3% and the Dow Jones to drop 0.4%.

The weakness follows a mixed session on Wall Street yesterday, when the Dow rose 148 points, or 0.3%, to 51,713, but the S&P 500 fell 0.4% to 7,473 and the Nasdaq dropped 1.3% to 26,167.

Alphabet dropped more than 5%, Amazon fell around 4% and Meta Platforms lost 2%, while Arm Holdings and Palantir both slid 7%.

The sell-off intensified in Asia, where South Korea’s Kospi plunged 10%, Japan’s Nikkei fell 3.6% and Hong Kong’s Hang Seng lost 1.8%.

European markets also traded lower, with the Stoxx 600 down 0.9%, the DAX off 0.9% and the FTSE 100 falling 0.4%.

Investor sentiment has begun “to turn sour, particularly towards the tech sector”, and this has morphed into “a significant selloff,” said David Morrison, senior market analyst at Trade Nation.

But Kenny Polcari at Slatestone Wealth said it was “not a disaster, but a bit of pressure. Remember – the market has climbed by nearly 20% off of the April low.”

He noted that of the 11 S&P sectors, six were higher and five lower, with communications getting hit the hardest on the back of a negative story about AI talent walking out the door at Google.

Technology actually finished 0.4% higher as investors dumped some of the largest names in the AI ecosystem but were “aggressively buying other parts of the AI trade, suggesting rotation not liquidation”, as semiconductors rose and memory names continued to attract fresh money.

Daniela Hathorn, senior market analyst at Capital.com, said the decline in SpaceX has “weighed on broader confidence in high-growth, innovation-led stocks and reignited concerns that investors may have become overly concentrated in a small number of AI and technology themes”. On a technical analysis basis, she said the “broader uptrend remains strong”.

Oil continued to decline on the back of that potential peace deal with Iran, with WTI trading 40 cents lower at $73.43, down 19% since last week and 26% off May highs.