TLDR
- Nasdaq 100 futures fell 0.7–0.8%, S&P 500 futures slipped 0.1%, while Dow futures edged up ~0.3%
- South Korea’s Kospi dropped over 10%, with SK Hynix and Samsung falling 14% and 13%
- Reports of Nvidia exploring a $250 billion funding backstop for OpenAI raised circular financing fears
- Chinese competition in chip manufacturing is adding pressure to US semiconductor stocks
- The Federal Reserve begins its two-day policy meeting Tuesday, with a rate decision due Wednesday
Nasdaq futures dropped sharply Tuesday morning as a sell-off in chip stocks deepened, driven by concerns over AI spending and growing competition from China.
Nasdaq 100 futures fell around 0.8%, pointing to further losses for tech when markets open. S&P 500 futures were down 0.1%, while Dow Jones futures bucked the trend, rising about 0.3%.
The pressure started in Asia. South Korea’s Kospi index plunged more than 10% on Tuesday, one of its sharpest single-day drops in years.
Memory chipmakers SK Hynix and Samsung Electronics were at the center of the sell-off. SK Hynix shares fell more than 14%, and Samsung dropped over 13%.
The selling was partly triggered by reports that a Chinese state-backed company is mass-producing chip-manufacturing machines. That news raised concerns that China is closing the gap with US firms in the semiconductor space.
AI Financing Fears Add to the Pressure
Sentiment around AI stocks took another hit from reports that Nvidia is exploring a $250 billion funding backstop for OpenAI. The arrangement would tie the two companies more closely together and has sparked concern about circular financing in the AI sector.
Traders are questioning whether AI investments will actually pay off, especially if Chinese rivals can produce comparable technology at lower cost.
Deutsche Bank analyst Jim Reid summed up the mood: “Renewed worries over AI investment spending, and competition from cheaper Chinese companies, have triggered another selloff in global semiconductor stocks.”
Fed Meeting and Earnings in Focus
The Federal Reserve kicks off its two-day policy meeting Tuesday. A rate decision comes Wednesday, and markets are unsure which way it goes. Traders lean toward rates staying steady, but a rate hike is still on the table.
Oil prices continued to fall after the US and Iran paused hostilities and entered diplomatic talks. President Trump said Monday that a deal was possible.
Earnings season is also in full swing. SK Hynix reports around 8 p.m. ET Tuesday, which investors will watch closely for signals on the memory chip market.
Other major companies reporting this week include Visa, Coca-Cola, Boeing, Ford, and PayPal.
A consumer confidence update is also scheduled for 10 a.m. ET, giving markets another economic read ahead of the Fed’s decision.
As of early Tuesday, the E-Mini Nasdaq 100 was trading at $27,915, down 0.97%. The E-Mini S&P 500 was at $7,441, down 0.09%, while the E-Mini Dow was at $52,704, up 0.61%.
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