Nasdaq Recovers After Global Chip Rout as AI Concerns Persist
Key Takeaways
- •South Korea’s KOSPI fell about 10%, triggering weakness across semiconductor stocks and weighing on US chip shares.
- •Nvidia dropped nearly 5% after reports that it is considering a $250 billion funding backstop for OpenAI.
- •The Federal Reserve began its two-day policy meeting, and traders assigned a 31.5% chance to a surprise rate hike.
- •US consumer confidence fell to 90.8 in July, while labor market views also weakened.
- •Coca-Cola gained 6.56% after beating quarterly earnings estimates and lifting its full-year outlook.
The Nasdaq Composite finished nearly flat on Tuesday after recovering from an earlier slide, while the Dow Jones Industrial Average gained about 1% and the S&P 500 rose roughly 0.3%.
The session was driven by a sharp selloff in Asian semiconductor stocks. South Korea’s KOSPI index fell about 10%, sending pressure through US chip names. The iShares Semiconductor ETF also declined again, extending Monday’s losses.
“A heavy selloff in Asian chipmakers is dragging broader equity markets lower amid valuation and capex worries,” said Tom Essaye of Sevens Research. “Focus is likely on whether the pre-market selloff in tech stocks accelerates or stabilizes.”
Nvidia ($NVDA) was the biggest mover, falling nearly 5%. Reports said the company is exploring a $250 billion funding backstop for OpenAI, deepening the financial relationship between the two firms. The reports added to concerns about circular financing across the AI ecosystem, while also keeping attention on how much capital spending and deal structure are shaping the sector’s valuation debate.
Traders are also becoming more cautious about Chinese AI competition narrowing the gap with US companies, which has added pressure to the broader AI trade.
Fed meeting in focus
The Federal Open Market Committee began its two-day policy meeting on Tuesday. Wednesday’s decision is being closely watched, with traders pricing in a 31.5% chance of a surprise rate hike, according to CME FedWatch data.
There is no clear consensus on the Fed’s next move. A hold remains the base case, but a hike is still seen as a possibility.
US consumer confidence slipped to 90.8 in July, according to the Conference Board. Views of the labor market weakened as well, giving policymakers another data point to consider.
Earnings continue
Coca-Cola ($KO) was the standout earnings winner on Tuesday, jumping 6.56% after raising its full-year outlook following a second-quarter earnings beat.
Other major companies reporting on Tuesday included Visa, Boeing, Ford, and PayPal. Investors were also watching SK Hynix results due around 8 p.m. ET for additional signals on the memory chip market, an area closely tied to broader AI infrastructure spending.
Oil prices continued to fall after the US and Iran paused active military hostilities. President Trump said diplomatic talks were underway, although the outcome remained unclear.
The S&P 500 has now posted back-to-back small gains, though the index gave up most of an early 1% advance on Monday, continuing a recent pattern of weak intraday follow-through, according to Frank Cappelleri, founder of CappThesis.
At the close, the Dow stood at 52,863, the S&P 500 at 7,444, and the Nasdaq at 24,956.