Wall Street ended sharply lower on Tuesday as a broad sell-off in semiconductor stocks dragged major indices lower, with investors growing increasingly concerned about the sustainability of debt-funded artificial intelligence (AI) spending and the prospect of a more hawkish US Federal Reserve.
The Nasdaq Composite dropped 2.21% to 25,587.04, while the S&P 500 fell 1.44% to 7,365.47, marking their lowest closes in more than a week. The Dow Jones Industrial Average was relatively resilient, slipping 0.09% to 51,665.49.
Technology stocks bore the brunt of the decline, with the Philadelphia Semiconductor Index plunging 7.9% and the S&P 500 information technology sector falling 3.7%.
Nvidia lost 4.1%, while Intel, Marvell Technology and Advanced Micro Devices declined between 5.8% and 9.4%. Memory chipmakers Micron Technology and SanDisk, among the best-performing stocks in the S&P 500 this year, tumbled about 13% each ahead of Micron’s earnings release.
According to market participants, concerns are mounting over the scale of capital expenditure being channelled into AI infrastructure and semiconductor capacity expansion, particularly as major technology companies increasingly tap debt markets to fund growth.
The market weakness followed a technology-led retreat on Wall Street, prompting investors to rotate into more defensive sectors. Consumer staples emerged as the strongest performer among the S&P 500 sectors, rising 1.8%.
Investor sentiment was also weighed down by expectations that the Federal Reserve could raise interest rates more aggressively than previously anticipated. Traders are now increasingly pricing in a second rate hike by December under Fed Chair Kevin Warsh.
The CBOE Volatility Index, often referred to as Wall Street’s fear gauge, climbed to 19.52, its highest level in more than a week, reflecting growing market uncertainty.
