Dow falls from record high as AI chip selloff drags Wall Street lower

• The VanEck Semiconductor ETF (SMH) dropped over 5%, with Micron down approximately 7% and other chip stocks including KLA, Marvell, Broadcom, and AMD posting steep declines as investors rotated out of AI-related stocks.
• Samsung's Q2 earnings (89.4 trillion won operating profit, 171 trillion won revenue) failed to impress markets, triggering a global chip selloff with South Korea's Kospi index falling nearly 5% and Chinese AI startup DeepSeek reportedly developing its own chip to reduce reliance on Nvidia and Huawei.
• Defensive sectors outperformed with healthcare and financials gaining ground, while oil prices surged about 5% (Brent to $75.74, WTI to $72.01) following reported Iranian attacks on a tanker near the Strait of Hormuz.

Market Summary: Dow Falls as Semiconductor Selloff Pressures Wall Street

Market Performance:

U.S. markets retreated Tuesday with the Dow Jones falling 131 points (-0.3%), the S&P 500 declining 0.5%, and the Nasdaq dropping 1.2%. The VanEck Semiconductor ETF (SMH) plunged over 5%, leading the broader market weakness.

Key Drivers:

The semiconductor sector experienced sharp losses after Samsung's Q2 earnings failed to impress investors despite strong projections of 89.4 trillion won operating profit and 171 trillion won revenue. The lukewarm market reaction triggered a global chip selloff, with South Korea's Kospi index falling nearly 5%. Micron Technology declined approximately 7%, while KLA, Marvell Technology, Broadcom, and AMD also posted steep losses.

Additional pressure came from reports that Chinese AI startup DeepSeek is developing its own AI chip, potentially reducing reliance on suppliers like Nvidia and Huawei. Investors are also anticipating SK Hynix's Nasdaq debut Friday.

Sector Rotation:

Defensive sectors outperformed as investors rotated away from AI-related stocks. Eli Lilly gained 2%, while JPMorgan Chase, Microsoft, and Walmart traded higher. Walmart announced price cuts on products including ground beef and Coca-Cola.

Energy Markets:

Oil prices surged approximately 5% following reports of Iranian attacks on a Qatari LNG tanker near the Strait of Hormuz. Brent crude settled at $75.74 per barrel, while WTI reached $72.01. Gains extended after the U.S. revoked a waiver authorizing Iranian oil sales.

Outlook:

Markets await Federal Reserve meeting minutes Wednesday for insights into monetary policy under Chair Kevin Warsh. The session reflected continued volatility in AI-related investments amid reassessment of semiconductor sector valuations.