Global stock markets split sharply on Tuesday as investors pulled capital out of artificial intelligence darlings and technology stocks, driving the Nasdaq-100 into correction territory. Meanwhile, the Dow Jones Industrial Average surged more than 500 points on strong blue-chip earnings and falling crude oil prices.
Wall Street Diverges: The Great Rotation Out of Tech
A profound shift gripped trading floors as investors executed a wide-ranging rotation out of artificial-intelligence darlings in favor of sectors left behind earlier in the year. The diverging fortunes of the major indices laid bare mounting anxieties over the sheer cost of the AI boom, alongside questions about whether the massive infrastructure buildout will yield the expected financial returns.
The Philadelphia Semiconductor Index plummeted nearly 6% during the session, dragging the Nasdaq-100 index into correction territory, which is defined as a drop of 10% or more from a recent record high. By the closing bell, the tech-heavy Nasdaq composite slipped 0.2%, while the broader S&P 500 managed a 0.2% gain, rising 15.60 points to 7,428.78.
Counterbalancing the technology rout, the Dow Jones Industrial Average jumped 537.24 points, or 1%, settling at 52,747.32. Blue-chip components such as Sherwin-Williams, IBM, Coca-Cola, Boeing, Salesforce, and Amgen all advanced 5% or more, providing the industrial average with a sturdy safety net as consumer staples and health care led the S&P 500 higher.
Chipmakers Hammered Amid Chinese Competition Fears
The sell-off in semiconductor and hardware stocks spared few major players. Micron Technology plunged 8.9%, ranking as the heaviest weight on the S&P 500, while Advanced Micro Devices fell 8.1% and Applied Materials dropped 7.8%. Other names across the memory and hardware space, including Sandisk, Western Digital, and Dell Technologies, absorbed severe losses ranging from 8% to 15%.
Market participants pointed to multiple pressures weighing on the sector. Beyond questions about sustainable growth after a year of gangbuster performance—during which Micron’s revenue more than quadrupled—traders reacted to reports concerning international competitors. Analysts noted that market sentiment was rattled by progress in China’s chipmaking equipment capabilities, sparking fears that foreign advancements could challenge established global leaders.
“We believe the market was likely spooked by the progress of China’s chipmaking equipment capabilities, and was worried that this progress would threaten the competitive position of global chipmaking and chip equipment leaders.”
Jing Jie Yu, equity analyst at Morningstar
Despite the steep declines, analysts suggested the reaction may be overstated.
Global Markets Suffer Steep Reversals in Asia
The selling pressure originated overseas, sweeping through Asian markets during overnight trading. Major regional memory suppliers Samsung Electronics and SK Hynix both plunged more than 15%, while storage maker Kioxia dropped 18%.
In Japan, the Nikkei index fell 4%.
Crude Oil Eases as U.S.-Iran Diplomacy Takes Focus
Commodity markets offered relief on another front as crude oil prices continued a sharp retreat from the two-month highs reached late last week.
The downward movement in energy prices followed hopes that the United States and Iran could still negotiate something to allow oil tankers to use the Strait of Hormuz to move crude. Concurrently, officials from Iran and Oman utilized a lull in hostilities to discuss reopening the Strait of Hormuz.
The easing of oil prices helped pull Treasury yields down across the board.
Big Tech Earnings and Federal Reserve Decision Loom
Market attention now shifts toward a heavy calendar of corporate earnings and monetary policy announcements. Several hyperscale cloud providers scheduled to report quarterly results later in the week—including Meta Platforms and Microsoft on Wednesday, followed by Amazon on Thursday—are expected to provide vital clarity on infrastructure expenditure.
Meanwhile, the Federal Open Market Committee commenced its two-day policy meeting. While the central bank is widely expected to leave interest rates unchanged, traders using the CME FedWatch Tool priced in a 31.5% probability of a surprise rate hike heading into Wednesday’s rate decision, down from over 36% prior to the retreat in oil prices.
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