Futures tied to the tech-heavy Nasdaq dropped on Tuesday on declines in chip stocks over concerns about the sustainability of the AI-driven rally despite strong results from Samsung, while SpaceX shares dipped ahead of their Nasdaq-100 debut.
Elon Musk’s SpaceX was set to begin trading as part of the Nasdaq-100 index on Tuesday and a wave of brokerages initiated coverage on the stock as an industry-mandated quiet period ended. Its shares fell 1.7 per cent in premarket trading.
Chip shares led losses, with memory chipmakers Micron Technology down 5.6 per cent, Western Digital off 6.2 per cent and Sandisk losing 5.2 per cent.
Samsung Electronics’ shares sank in South Korea despite the company reporting a 19-fold jump in second-quarter operating profit and surpassing its combined earnings over the past three years.
“The wider issue is whether this is a new chapter for investor reaction, related not to any weakness in demand or immediate profitability,” said Richard Hunter, head of markets at interactive investor.
“But rather, whether the level of earnings can be maintained in order to repay the trillions of dollars which have been funneled into AI investment by the hyperscalers.”
Chip stocks have been some of the biggest winners of the AI trade so far this year amid hopes of insatiable AI demand, though concerns of the sector being overbought and investors taking profits have led to some volatility lately.
Other chip-related stocks including Intel fell 4 per cent. Marvell Technology eased 4.5 per cent and Qualcomm lost 2.4 per cent amid sectorwide weakness.
Another test for the appetite for chip stocks looms later this week, when South Korean giant SK Hynix’s U.S. listing begins trading on the Nasdaq.
At 04:56 a.m. ET, Dow E-minis rose 86 points, or 0.16 per cent, S&P 500 E-minis fell 11.75 points, or 0.15 per cent, and Nasdaq 100 E-minis were down 270.75 points, or 0.9 per cent.
Dow futures bucked the trend as software plays Microsoft , Salesforce and IBM rose. The blue-chip index crossed the 53,000-point mark for the first time on Monday.
The index clocked its fifth 1,000-point milestone this year, as receding oil prices on the back of easing Middle East tensions have offered support lately.
Morgan Stanley said in a note dated Monday that the recent weakness in U.S. semiconductor stocks is a sign that market gains are broadening, with investors likely to turn toward AI hyperscalers.
Most megacap and growth stocks were trading higher, barring Tesla and Nvidia, which fell around 1 per cent each.
Fiserv climbed 7.1 per cent following media reports that the payments firm held talks with U.S. banks including JPMorgan and Bank of America to sell its payments infrastructure business that handles debit card transactions.
Rivian dropped 7.6 per cent after the electric-vehicle maker launched an offer to sell 75 million shares, even as it forecast second-quarter revenue above analysts’ estimates.
Meanwhile, U.S. Federal Reserve watchers will get another glimpse into how new Chair Kevin Warsh steers the central bank when it releases the minutes of its last meeting on Wednesday, the first of his tenure.
Traders currently see at least one 25-basis-point rate hike on the cards this year, according to data compiled by LSEG.
Global stocks fell on Tuesday as technology shares slid despite blockbuster results from Samsung Electronics, with investors remaining concerned about the sustainability of the AI-driven rally, while oil prices rose on renewed Middle East tensions.
Samsung Electronics forecast a 19-fold jump in April-June operating profit to 89.4 trillion won ($58.4 billion), marking a third straight quarter of record operating profit for the world’s largest memory chipmaker.
Rather than reassuring investors, the results triggered heavy selling in Samsung and rival SK Hynix shares, weighing on South Korea’s Kospi and other technology-heavy Asian markets. Investors have increasingly questioned whether profit growth linked to artificial intelligence can be sustained if supply bottlenecks in key components such as memory chips ease.
“This is a record for Samsung, but rather than placate the markets, these strong results have led to fears that the AI chip sales boom cannot be sustained,” Kathleen Brooks, research director at XTB, said.
Morgan Stanley said in a note dated Monday that recent weakness in U.S. semiconductor stocks signaled a broadening of market gains, with investors likely to turn towards AI hyperscalers as well as consumer discretionary, transport and biotechnology shares.
SK Hynix is due to enter the Nasdaq this week in a $28 billion listing, one of the world’s largest new share sales, as the chipmaker seeks to capitalize on the AI boom.
Its shares, which were up as much as 350 per cent this year at their peak two weeks ago, have since fallen about 30 per cent amid a broader sell-off in global chip stocks.
In Europe, where exposure to volatile AI-linked stocks is more limited, the STOXX 600 rose 0.1 per cent, supported by gains in oil and gas shares as crude prices edged higher amid signs that U.S.-Iran peace talks were losing momentum.
Adding to market concerns, Iran’s Revolutionary Guards fired at least two missiles at commercial ships transiting the Strait of Hormuz on Monday, Axios reported, citing two U.S. officials. The ships suffered significant damage, but there were no casualties, the report said.
Brent crude futures rose about 1 per cent to $72 a barrel.
U.S. President Donald Trump, who has pressed Europe to boost defense spending and clashed with European leaders over the Iran war and Greenland, is due to attend a NATO meeting in Turkey beginning on Tuesday.
Trump said on Monday the U.S. would either reach a deal with Iran or “finish the job,” renewing his threat of military action as Tehran projects defiance following the funeral of former Supreme Leader Ayatollah Ali Khamenei.
In currency markets, the dollar index, which tracks the U.S. currency against six others, was little changed at 100.88. The euro was down 0.03 per cent at $1.1436.
The yen rebounded from beyond 162 per dollar, near 40-year lows, and was last up 0.17 per cent at 161.79 per dollar. Traders remained alert for intervention amid signs of a possible shift in strategy by Japanese authorities.
Japanese government bond yields fell from multi-decade highs after a sale of super-long-term debt attracted strong demand.
The yield on benchmark U.S. 10-year notes rose 1.62 basis points to 4.495 per cent, from 4.479 per cent late on Monday.
Reuters