S&P 500 and Nasdaq decline on semiconductor selloff amid AI spending fears

U.S. equity markets retreated on Tuesday as semiconductor stocks led a broad selloff across major indices. The S&P 500 and Nasdaq both closed at levels not seen in over a week, according to market reports. The decline was primarily driven by investor apprehension regarding the sustainability of debt-fueled artificial intelligence spending, a sector that has dominated market narratives in recent months. Semiconductor stocks, which have benefited substantially from the AI boom, bore the brunt of the selling pressure as sentiment shifted toward caution.

Monetary policy expectations also weighed on sentiment. Traders have begun pricing in a higher probability of a second Federal Reserve interest rate hike occurring by December, suggesting market participants anticipate a more hawkish monetary policy stance than previously expected. This shift in rate expectations typically pressures equities, particularly growth-oriented and technology-heavy sectors that dominate indices like the Nasdaq.

The global nature of market movements was evident as Indian markets followed suit, mirroring the declines seen in U.S. benchmarks. This synchronized downturn underscores how interconnected global equity markets have become and how sentiment shifts in major economies can rapidly cascade across international exchanges. The combination of concerns over AI spending sustainability and tightening monetary policy expectations has created headwinds for risk assets, particularly technology and semiconductor companies that have led the year's market advances.

Source: Markets-Economic Times