Wall Street is bracing for a mixed open on Tuesday, with technology shares under pressure as concerns over the cost of the artificial-intelligence boom and rising competition from China weigh on investor sentiment. Nasdaq 100 futures fell 0.83%, or about 240 points, while S&P 500 futures edged 0.10% lower. In contrast, Dow futures gained 145 points, or 0.28%, signaling a divergence between tech and the broader market.
The sell-off extended from Asia, where South Korea's Kospi plunged 10.8% and Taiwan's semiconductor-heavy index suffered heavy losses. The rout was led by memory-chip and AI-linked stocks, as investors question whether the massive capital expenditures on data centers and chips will generate returns quickly enough to justify current valuations.
1. Micron leads another chip retreat
Micron Technology fell 4.6% in premarket trading, Applied Materials lost 3.5%, and Nvidia slipped 1.1%. US-listed shares of SK Hynix and TSMC dropped 4% and 2.6%, respectively. The declines follow a brutal session in Asia, where SK Hynix tumbled 14.7% and Samsung Electronics fell sharply, as detailed in our coverage of the tech rout deepening ahead of key earnings.
2. China competition becomes a valuation risk
Beyond spending concerns, reports that China has begun mass production of domestically developed deep-ultraviolet chipmaking equipment have added a new layer of uncertainty. The development suggests that cheaper alternatives and local semiconductor capacity could erode the pricing power of established suppliers over time. While some analysts view the sell-off as excessive, arguing that leading global chipmakers retain formidable technology and scale advantages, China's progress is forcing investors to reconsider how long today's margins and market shares can be sustained.
3. Big Tech must defend the AI bill
Microsoft and Meta report after Wednesday's close, followed by Amazon and Apple on Thursday. The market will focus on cloud growth, capital expenditure, and evidence that AI products are generating revenue fast enough to offset the cost of data centers, chips, and power. The four stocks were only marginally higher before the bell, suggesting investors are reluctant to take large positions before the results. For more on what to watch, see our preview of key drivers for the S&P 500 and Nasdaq this week.
4. Semiconductor damage is no longer superficial
The Philadelphia Semiconductor Index has fallen more than 20% from its June record, meeting the usual definition of a bear market. The Roundhill memory-chip ETF slid 6.6% and has remained below its 50-day moving average for two weeks. This technical damage raises the risk that rebounds will attract sellers until earnings reset expectations for demand and AI infrastructure spending.
5. The Fed and cheaper oil offer a counterweight
The Federal Reserve began its two-day meeting on Tuesday and will announce its decision at 2 pm ET on Wednesday. Markets assign a 37.4% probability to an immediate rate cut, while still expecting at least 25 basis points of tightening by year-end. Oil fell 2.8% to a one-week low as the US-Iran pause held, easing some inflation pressure. However, the relief remains fragile after fresh drone incidents across the region kept threats to energy infrastructure in focus. For broader context on how these factors are shaping markets, see our analysis of the Dow's rally on US-Iran de-escalation.
This article is for informational purposes only and does not constitute financial advice.
