The Nasdaq managed to recover most of its losses Tuesday, finishing nearly flat after an early dip driven by a global sell-off in semiconductor stocks. Meanwhile, the Dow climbed 1% and the S&P 500 edged up 0.3%, supported by strong corporate earnings and mixed economic signals.
Asian chip shares took a sharp hit with South Korea’s KOSPI index plunging roughly 10%, dragging down semiconductor stocks worldwide. This slump hit the iShares Semiconductor ETF hard, extending its recent downtrend amid investor worries over AI valuations and capital spending.
Pressure Mounts on AI and Chip Stocks
Nvidia was a standout loser, dropping nearly 5% after reports surfaced that the company might provide a $250 billion financial backstop to OpenAI. Such a move raised concerns about circular financing risks within the AI investment ecosystem. also traders are growing wary as Chinese AI competitors narrow the technological lead, putting pressure on the US-focused AI trade.
Tuesday also marked the start of the Federal Reserve’s two-day policy meeting. Markets are pricing in about a 31.5% chance of an unexpected interest rate hike on Wednesday, while a decision to hold rates steady remains the most likely outcome. Recent data showed US consumer confidence slipping to 90.8 in July, with softer labor market views adding complexity to the Fed’s decision.
On the corporate front, Coca-Cola surged over 6.5% after raising its full-year outlook following a strong second-quarter earnings report. Other major companies reporting results Tuesday included Visa, Boeing, Ford, and PayPal.
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