US stocks fell on Tuesday as a technology-led sell-off extended into a second session, with semiconductor and artificial intelligence-related shares leading losses amid global market weakness.
The S&P 500 declined 1.43%, while the Nasdaq Composite dropped 2.21%.
The Dow Jones Industrial Average ended slightly below the flatline, down by 45 points after earlier intraday weakness.
The major indices recovered modestly from session lows as gains in select non-chip technology names, defensive sectors, and individual outperformers helped cushion the decline.
Microsoft and Amazon moved higher alongside defensive stocks such as Walmart, Procter & Gamble, and Johnson & Johnson.
IBM also surged more than 5% after JPMorgan upgraded the stock to overweight, while Sherwin-Williams and Merck posted gains.
The session followed a steep global risk-off move in technology shares, particularly in Asia, where memory chip stocks saw sharp declines.
Semiconductor and AI stocks drive global tech rout
The Nasdaq Composite had already fallen 1.3% in Monday’s session, led by losses in Alphabet.
Selling pressure intensified globally on Tuesday, with South Korea’s Kospi index leading regional declines.
Memory chipmaker SK Hynix fell more than 12%, contributing to a nearly 10% drop in the benchmark index, despite its 95% gain earlier in the year. Japan’s Nikkei 225 declined 3.55%, snapping an eight-session winning streak.
US semiconductor names followed the same trajectory. Micron Technology dropped 11%, SanDisk fell 12%, and Seagate Technology lost more than 6%.
Intel declined 4%, while Advanced Micro Devices and Qualcomm fell 5% and 8%, respectively.
Chip-related exchange-traded funds also weakened, with the State Street Technology Select Sector SPDR ETF falling 3% and the VanEck Semiconductor ETF dropping 6%.
Alphabet extended losses, slipping again after a 5% drop on Monday linked to concerns over AI talent departures.
SpaceX, however, moved in the opposite direction, rising 6% during the session.
AI spending concerns and valuation pressure weigh on sentiment
Market participants pointed to growing scrutiny around artificial intelligence capital spending and financing strategies as a key driver of the sell-off.
The Nasdaq and S&P 500 both closed at more than one-week lows, weighed down by semiconductor stocks as investors reassessed the pace and funding of AI-related infrastructure investment.
Concerns over debt-funded expansion among hyperscalers added to pressure across the sector.
The Philadelphia Semiconductor Index and the S&P 500 information technology index both declined sharply.
Investors are also watching monetary policy expectations closely.
Traders are increasingly pricing in a potential second Federal Reserve rate hike by December, compared with expectations of just one hike two weeks earlier, according to LSEG data.
The CBOE Volatility Index rose to its highest level in over a week, reflecting rising market uncertainty ahead of key macroeconomic data, including Thursday’s Personal Consumption Expenditures price index, the Federal Reserve’s preferred inflation measure.
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