The S&P 500 fell 1.4% on Tuesday as a sharp selloff in semiconductor stocks deepened concerns over the sustainability of massive artificial intelligence spending by major tech companies. The Nasdaq Composite dropped 2.2% and the Philadelphia Semiconductor Index slid 7.9%, marking a reversal for memory chip stocks that had been among the year’s strongest performers.
Investors scrutinized growing debt-funded AI spending by hyperscalers—the major cloud and AI infrastructure providers—as the primary trigger for the tech retreat. According to Reuters, Thomas Martin, senior portfolio manager at Globalt, said “some of the news lately about AI raises questions about all the spending that’s being done and the capex and ramping of the capacity for semiconductors.”
Major chip and AI-linked stocks bore the brunt of selling pressure. Nvidia fell 4.1%, while Intel, Advanced Micro Devices, and Marvell Technology dropped between 5.8% and 9.4%, according to Reuters. Memory chipmakers Micron Technology and SanDisk, which had been among the S&P 500’s best performers this year, each fell around 13%.
The selloff reflects mounting investor anxiety over the scale of AI infrastructure investment. Big tech hyperscalers—Amazon, Microsoft, Alphabet, and Meta—are collectively planning to spend roughly $600 billion to $700 billion on AI capital expenditures in 2026, a 36% to 71% increase from the prior year, according to multiple analyst estimates. Goldman Sachs has projected that hyperscaler capex could reach $1.1 trillion in 2027.
Reuters reported that concerns over hyperscalers’ debt-funded AI spending contributed to the selloff, with companies tapping bond markets to raise capital for infrastructure buildout. SpaceX, which debuted this month, has joined a list of megacaps raising funds through debt offerings.
Beyond AI concerns, traders are increasingly betting on a second interest rate hike by the Federal Reserve by December, according to LSEG data, compared to expectations of just one 25-basis-point hike two weeks ago. This repricing reflects hawkish monetary policy expectations under new Fed Chair Kevin Warsh.
Micron Technology’s earnings report scheduled for Wednesday could offer further clues on the outlook for the memory and AI chip sector after the sharp rally earlier in the year, according to Reuters. The CBOE Volatility Index, Wall Street’s fear gauge, climbed to an over-one-week high of 19.52.
Sources
- Reuters — S&P 500 and Nasdaq closing levels, semiconductor index performance, individual stock declines, analyst commentary from Thomas Martin at Globalt, hyperscaler debt-funded spending concerns, Fed rate hike expectations, Micron earnings timing
- Barron’s — S&P 500 fell 1.4%, Nasdaq tumbled 2.4%, semiconductor selloff confirmation
- Yahoo Finance / MUFG Americas — Hyperscaler capex 2026 estimates of $600+ billion with 36% increase
- MarketWise — Amazon, Microsoft, Alphabet, and Meta capex plans for 71% increase to $650 billion in 2026
- Goldman Sachs — Hyperscaler capex projection of $1.1 trillion in 2027
