Dow slips 45 points as tech sell-off deepens on AI and chip stock weakness

• Chip stocks led declines with Micron down 11%, SK Hynix falling 12%, and the VanEck Semiconductor ETF dropping 6% as investors questioned AI infrastructure investment pace and funding strategies
• Global tech rout spread to Asian markets, with South Korea's Kospi down nearly 10% and Japan's Nikkei falling 3.55%, ending an eight-session winning streak
• Traders now price in a potential second Fed rate hike by December ahead of Thursday's PCE inflation data, the Fed's preferred inflation measure, as the VIX rose to its highest level in over a week

Market Summary: Tech Sell-Off Deepens on AI and Chip Concerns

Key Market Movements

U.S. equities declined Tuesday as technology stocks extended losses into a second session. The S&P 500 fell 1.43%, the Nasdaq Composite dropped 2.21%, and the Dow Jones slipped 45 points. Both the Nasdaq and S&P 500 closed at one-week lows.

Semiconductor Rout

Semiconductor stocks led the decline amid growing concerns over AI capital spending and debt-funded expansion. Micron plunged 11%, while Seagate fell over 6%. AMD and Intel declined 5% and 4% respectively, while Qualcomm dropped 8%. The VanEck Semiconductor ETF tumbled 6%, and the State Street Technology Select Sector SPDR ETF lost 3%.

Global Impact

The sell-off reverberated internationally. South Korea's Kospi index fell nearly 10%, with memory chipmaker SK Hynix down 12%. Japan's Nikkei 225 declined 3.55%, ending an eight-session winning streak.

Company-Specific Moves

Alphabet extended Monday's 5% loss with additional declines Tuesday, pressured by AI talent departure concerns. Conversely, defensive stocks provided support: Microsoft, Amazon, Walmart, Procter & Gamble, Johnson & Johnson, Merck, and Sherwin-Williams posted gains. SpaceX rose 6%.

Market Drivers

Investor scrutiny intensified around AI infrastructure spending pace and financing strategies among hyperscalers. The CBOE Volatility Index reached its highest level in over a week. Traders now price in a potential second Federal Reserve rate hike by December, up from one hike anticipated two weeks prior.

Upcoming Catalysts

Markets await Thursday's Personal Consumption Expenditures (PCE) price index—the Fed's preferred inflation gauge—which could influence monetary policy expectations and market direction.