US stocks: S&P 500 slips, Nasdaq falls as AI chip worries persist

The S&P 500 slipped and the Nasdaq fell sharply on Tuesday, weighed down by losses in chip stocks amid doubts over the durability of the artificial intelligence (AI)-led rally, despite robust Samsung earnings. Sentiment was also hit by a Reuters report that Chinese startup DeepSeek is developing its own AI chip.

 

Nvidia fell 1.8 per cent after Reuters reported that DeepSeek is developing its own AI chip, a move that could reduce its dependence on Nvidia and Huawei chips.

 

Chip stocks tumbled across Wall Street, with the Philadelphia Semiconductor Index declining 5.5 per cent to a four-week low. Intel shares sank 8.2 per cent, while Micron fell 7.3 per cent, making them among the biggest losers on the benchmark S&P 500.

 

 

Samsung Electronics shares fell in South Korea despite the company reporting a 19-fold jump in second-quarter operating profit, surpassing its combined earnings over the past three years.

 

"The (Samsung) results were in themselves fundamentally good, but it seems to have a knock-on effect on general markets that once people start being negative about Samsung, that negativity extends across markets," said Michael Field, chief equity market strategist at Morningstar.

 

Shares of chip companies have been among the biggest beneficiaries of the AI trade this year amid expectations of insatiable AI demand. However, concerns that the sector is overbought, along with profit-taking by investors, have led to increased volatility.

 

Another test of investor appetite for chip stocks looms later this week when South Korean chipmaker SK Hynix's US listing begins trading on the Nasdaq.

 

Elon Musk's SpaceX began trading as part of the Nasdaq-100 index, while a wave of brokerages initiated coverage of the stock after an industry-mandated quiet period ended. Its shares declined 4.5 per cent.

 

Nine of the 11 S&P 500 sectors were trading higher, although weakness in chip stocks overshadowed broader gains. Consumer staples and healthcare were the top gainers.

 

At 9:58 a.m. ET, the Dow Jones Industrial Average rose 14.18 points, or 0.03 per cent, to 53,070.09. The S&P 500 fell 25.30 points, or 0.34 per cent, to 7,512.13, while the Nasdaq Composite lost 267.74 points, or 1.02 per cent, to 25,853.42.

 

The Dow, meanwhile, climbed to another intraday record, supported by gains in consumer and healthcare stocks. It crossed the 53,000-point mark for the first time on Monday and achieved its fifth 1,000-point milestone this year as easing Middle East tensions and lower oil prices boosted sentiment.

 

Oil prices, however, rose on Tuesday following reports of attacks on vessels near the Strait of Hormuz.

 

Fiserv gained 3.5 per cent after media reports said the payments company had held discussions with US banks, including JPMorgan and Bank of America, to sell its payments infrastructure business that handles debit card transactions.

 

Rivian fell 13.3 per cent after the electric vehicle maker launched an offering to sell 75 million shares, even as it forecast second-quarter revenue above analysts' estimates.

 

Meanwhile, US Federal Reserve watchers will get another glimpse into how new Chair Kevin Warsh is steering the central bank when the minutes of its latest meeting — the first of his tenure — are released on Wednesday.

 

Declining stocks outnumbered advancing stocks by a ratio of 1.1:1 on the NYSE and 1.79:1 on the Nasdaq.

 

The S&P 500 recorded no new 52-week highs or lows, while the Nasdaq Composite also recorded no new highs or lows.