U.S. stocks traded mixed on Tuesday as another wave of selling hit semiconductor and AI players, extending pressure on the tech sector and dragging the Nasdaq lower. Investors also continued to digest fading optimism surrounding the U.S.-Iran peace framework while reassessing expectations for interest rates to remain elevated for longer.
The tech-heavy Nasdaq Composite fell roughly 1.6%, while the S&P 500 lost around 1%. The Dow Jones Industrial Average outperformed, hovering near the flat line as investors rotated into less technology-dependent sectors. The weakness followed a sharp decline in major chipmakers across both U.S. and Asian markets, raising fresh questions about whether AI-related stocks had become overheated after months of outsized gains.
Market Movers:
- Infleqtion (INFQ) +10%: Quantum computing stocks rallied after President Trump signed executive orders designed to accelerate U.S. quantum research and expand adoption of quantum technologies across federal agencies. Investors welcomed the administration's goal of achieving a scientifically useful quantum computer by 2028, lifting sentiment across the broader quantum computing sector.
- IBM (IBM) +3%: Shares moved higher after IBM announced a partnership with OpenAI focused on bringing advanced artificial intelligence capabilities into enterprise cybersecurity operations. The collaboration strengthens IBM's growing AI strategy while supporting its broader push to automate threat detection and security workflows.
- Avis Budget Group (CAR) +3%: The rental car giant gained after reaching a proposed settlement with Pentwater Capital Management that could deliver approximately $650 million in cash to the company. Investors viewed the agreement as a potentially significant financial benefit pending court approval.
- Primoris Services (PRIM) -38%: Shares collapsed after the infrastructure company sharply lowered its full-year outlook due to cost overruns and delays within its renewable energy business. The announcement was compounded by the immediate departure of the company's chief operating officer, adding concerns about execution and leadership stability.
- Advanced Micro Devices (AMD) -7%: AMD led a broad semiconductor retreat as investors reacted to reports that SK Hynix may slow expansion plans for AI memory production. The weakness spread throughout the chip sector, fueling concerns that enthusiasm surrounding AI infrastructure spending may be cooling.
- Alphabet (GOOG, GOOGL) -3%: Shares slipped after another prominent AI researcher departed Google DeepMind for rival Anthropic. The latest talent loss adds to growing investor concerns about increasing competition for top artificial intelligence researchers.
- Best Buy (BBY) -3%: The electronics retailer declined after announcing that Chief Financial Officer Matt Bilunas will step down later this summer. Investors appeared cautious as the company navigates multiple executive transitions while facing a challenging consumer spending environment.
Global Chip Sell-Off Raises Questions About AI Momentum
The biggest story driving markets Tuesday was a sharp sell-off in memory chip stocks, particularly in South Korea, where SK Hynix and Samsung Electronics both posted steep declines. The weakness spilled into U.S. markets and reignited debate over whether AI-related valuations have become stretched following the sector's remarkable rally over the past year.
Investors are now closely watching Micron Technology's earnings report due later this week. The results are expected to provide one of the clearest snapshots yet into the strength of AI-driven memory demand and whether spending trends remain robust enough to justify elevated valuations across the semiconductor space.
U.S.-Iran Negotiations Continue to Support Oil Markets
While optimism surrounding a final peace agreement has cooled somewhat, negotiations between the United States and Iran continue to show signs of progress. Both countries have agreed to a 60-day roadmap toward a broader treaty, helping reduce fears of prolonged disruptions to global energy supplies. Oil prices moved lower as traders responded to reports of increased traffic through the Strait of Hormuz and a temporary easing of U.S. sanctions. Lower crude prices have helped offset some inflation concerns that have weighed on markets in recent months.
Economic Data Shows Continued Growth
Fresh economic data offered some reassurance that the U.S. economy remains on stable footing despite geopolitical uncertainty and higher interest rates. Preliminary June PMI data showed both manufacturing and services activity expanded faster than expected, marking a third consecutive month of growth. Manufacturing activity reached its highest level in more than four years, while services activity also improved. Although economists noted overall growth remains slower than earlier in the year, the data suggests businesses are becoming more confident as geopolitical risks begin to ease.
Looking Ahead
Investors now turn their attention to Micron's earnings report, which could serve as a key test for the AI investment theme after this week's sharp semiconductor sell-off. Markets will also continue monitoring developments in U.S.-Iran negotiations, while incoming economic data may help determine whether expectations for higher interest rates remain firmly in place through the second half of the year. For now, Wall Street remains caught between signs of economic resilience and growing questions about whether the AI-fueled rally that powered markets higher can continue at the same pace.