NEW YORK: The benchmark S&P 500 edged higher in a choppy session on Tuesday, as gains in other sectors offset a decline in chip stocks ahead of key earnings reports from some of Wall Street’s “Magnificent Seven” companies.
Global markets have become increasingly volatile this month as investors scrutinize the need for more corporate spending on AI infrastructure such as semiconductors that underpinned strong gains in chip stocks in the previous quarter.
Reflecting the volatility on Tuesday, the tech-heavy Nasdaq was trading off session lows after hitting levels last seen in late April earlier in the session.
Chip majors such as Micron slid 8.8 percent, Intel shed 4.6 percent, while Nvidia wobbled and was last up 1 percent. SanDisk fell 13 percent, while Dell and Seagate lost over 10 percent each.
The Philadelphia SE Semiconductor Index was down 3.5 percent, while Roundhill’s Memory Exchange Traded Fund fell 7.2 percent to an over two-month low.
Signs that Wall Street’s biggest companies such as Alphabet and Tesla are running out of cash to fund their ambitions have also made markets nervous, while China showcases cheaper AI models and deepens its presence in the competitive semiconductor industry.
“Investors are becoming less willing to reward higher AI spending on its own and are increasingly looking for progress in earning a return on that investment,” Brian Therien, a senior analyst at Edward Jones, said.
When AI hyperscalers Amazon.com, Meta, Apple and Microsoft report earnings later this week, investors will be keen to see if their investments, worth over several hundred billion dollars, are yielding returns.
Investors instead favored more cash-laden tech companies. Apple rose 0.8 percent, sending its market capitalization briefly above USD5 trillion for the first time and making it only the second company ever to achieve that milestone after Nvidia.
At 12:10 p.m. ET, the Dow Jones Industrial Average rose 648.32 points, or 1.24 percent, to 52,858.40, the S&P 500 gained 26.61 points, or 0.36 percent, to 7,439.79 and the Nasdaq Composite lost 3.47 points, or 0.01 percent, to 24,928.61.