S&P 500 slips and Nasdaq tumbles as chip stocks remain under pressure amid AI concerns

US stock indexes traded lower on Tuesday, with the S&P 500 edging down and the Nasdaq suffering sharp losses as semiconductor stocks came under heavy selling pressure. Investor concerns over the sustainability of the artificial intelligence-driven rally weighed on sentiment despite strong earnings reported by Samsung Electronics. Additional pressure emerged after reports that Chinese AI company DeepSeek is developing its own AI chip.

Nvidia shares fell 1.8% after Reuters reported that DeepSeek is working on a proprietary artificial intelligence chip, a move that could reduce its reliance on processors supplied by Nvidia and Huawei.

The sell-off spread across the broader semiconductor sector on Wall Street, with the Philadelphia Semiconductor Index (SOX) dropping 5.5% to its lowest level in four weeks.

Intel shares declined 8.2%, while Micron Technology fell 7.3%, making them among the worst performers in the S&P 500.

Samsung results fail to lift sentiment

In South Korea, Samsung Electronics shares declined despite the company reporting a nearly nineteen-fold increase in second-quarter operating profit compared with the same period last year, exceeding its combined earnings from the previous three years.

Michael Field, Chief Equity Strategist at Morningstar, said Samsung's results were fundamentally strong, but investors reacted negatively to the stock, and that pessimism quickly spread across global semiconductor shares.

Chipmakers have been among the biggest beneficiaries of the artificial intelligence boom since the start of the year, supported by expectations of sustained demand for advanced semiconductors. However, concerns about stretched valuations and profit-taking activity have recently increased market volatility.

Investors will face another test of sentiment toward semiconductor stocks later this week when shares of South Korean chipmaker SK Hynix begin trading on the Nasdaq.

SpaceX falls after Nasdaq-100 inclusion

Meanwhile, SpaceX began trading as a member of the Nasdaq-100 Index. The stock also received initial coverage from several Wall Street research firms following the expiration of regulatory restrictions, but shares nevertheless fell 4.5%.

Market performance

As of 9:58 a.m. Eastern Time:

The Dow Jones Industrial Average rose 14.18 points, or 0.03%, to 53,070.09.

The S&P 500 declined 25.30 points, or 0.34%, to 7,512.13.

The Nasdaq Composite dropped 267.74 points, or 1.02%, to 25,853.42.

Despite weakness in technology shares, the Dow continued setting fresh record highs during the session, supported by gains in consumer staples and healthcare stocks. The index surpassed the 53,000-point level for the first time in its history on Monday, marking its fifth 1,000-point milestone advance since the beginning of the year, helped by lower oil prices following easing tensions in the Middle East.

Oil prices, however, rebounded on Tuesday after reports emerged of attacks on vessels near the Strait of Hormuz, reviving geopolitical concerns across financial markets.

Notable stock movers

Pfizer gained 3.5% following media reports that the company held discussions with major US banks, including JPMorgan and Bank of America, regarding the potential sale of its debit-card payment infrastructure business.

Rivian Automotive plunged 13.3% after announcing a public offering of 75 million shares, despite forecasting second-quarter revenue above analyst expectations.

Focus shifts to Federal Reserve minutes

Investors are now awaiting the release of the Federal Reserve’s latest meeting minutes on Wednesday, the first set of minutes under new Chair Kevin Warsh, for further clues about the future direction of US monetary policy.

Market breadth remained negative, with declining stocks outnumbering advancing issues by 1.1-to-1 on the New York Stock Exchange and by 1.79-to-1 on the Nasdaq.

Neither the S&P 500 nor the Nasdaq Composite recorded any new 52-week highs or lows during the session.