US tech stocks slid on Tuesday as a sell-off in Korean memory makers underscored concerns about AI circular financing deals, overshadowing a drop in oil prices and earnings optimism.
The Nasdaq Composite (^IXIC) fell 1%, adding to losses for the tech-heavy index, while the S&P 500 (^GSPC) down 0.1%. But the Dow Jones Industrial Average (^DJI) rose 0.7% as investors weighed the latest quarterly results.
South Korea’s Kospi (^KS11) stock benchmark tumbled over 10% on Tuesday as investors dumped shares in top memory chipmakers SK Hynix (SKHY, 000660.KS) and Samsung Electronics (005930.KS).
Sentiment on the AI trade has soured amid reports that Nvidia (NVDA) is exploring a $250 billion funding backstop for OpenAI (OPAI.PVT), further intertwining the two companies and heightening worries about circular financing. Tech traders also grew nervous that Chinese competition is narrowing the AI gap with US companies, undermining prospects for a payoff.
The earnings deluge continues, with household names such as Visa (V), Boeing (BA), Ford (F), and PayPal (PYPL). Coca-Cola (KO) raised its full-year outlook as it posted a second quarter earnings beat. Investors will be watching SK Hynix’s results due around 8 p.m. ET for insight into the memory trade as AI worries swirl.
Oil prices, meanwhile, continued to retreat after the US and Iran halted active fighting and President Trump said the two sides were in diplomatic talks. “There’s a good chance that something could happen, and if it does, good,” Trump said aboard Air Force One on Monday. “If it doesn’t, we go back to doing what we were doing.”
The Federal Reserve kicks off its two-day policy meeting on Tuesday, and it’s one of the hardest policy decisions for the market to call in years. Traders’ bets skew toward the Fed holding rates steady at the end of its meeting on Wednesday, but there isn’t conviction, and a rate hike could be on the table.
US consumer confidence ticked lower in July to 90.8, according to the Conference Board, as perceptions of the labor market softened.