It was another rollercoaster session on Wall Street, with high-flying AI stocks taking investors on a ride that ended lower.
The S&P 500 dropped 0.9% after swinging from a 1% gain to a 2.3% loss in the middle of the day. The Nasdaq composite fell 1.7%, while the Dow Jones Industrial Average lost 82 points, or 0.2%.
The wild moves came as stocks in companies that make the building blocks of the AI boom — computer chips and memory — reversed early gains and plunged. Micron Technology went from a 4.2% jump to a 5.1% drop, just a day after soaring 9.9% and two days after plunging 13.3%. The memory maker's stock has already tripled this year, raising fears it's gone too far, too fast.
Marvell Technology dropped 10.7%, and Advanced Micro Devices sank 5.9% after both erased morning gains. Nvidia, the most valuable company on Wall Street, fell 1.6%, weighing heavily on the S&P 500.
The sell-off raises the question: are AI stocks heading for a long downturn, or did they just need a shake-out to get rid of excessive optimism?
Meanwhile, several big-name AI companies are racing to list on US exchanges. OpenAI, the maker of ChatGPT, said Monday it filed confidential paperwork with US regulators for an initial public offering. SpaceX's IPO could happen later this week.
The weakness in AI stocks drowned out the benefit of easing oil prices. More stocks in the S&P 500 actually rose than fell, as Brent crude sank 2.9% to $91.56 a barrel.
Oil prices have been swinging as hopes rise and fade that the US and Iran can reach a deal to reopen the Strait of Hormuz. A reopening would allow oil tankers to resume deliveries from the Persian Gulf. But prices pared losses after President Donald Trump said Iran was responsible for downing an American military helicopter near the strait and that the US "must" respond.
High oil prices caused by the war with Iran have already accelerated inflation for US shoppers and pushed bond yields higher worldwide, raising pressure on stocks.
Treasury yields eased a bit Tuesday as oil prices fell. The yield on the 10-year Treasury dropped to 4.53% from 4.56% late Monday, though it's still well above its 3.97% level from before the war.
Inflation data is coming later this week: consumer prices on Wednesday and wholesale prices on Thursday. Inflation is high enough, and the job market strong enough, that traders expect the Federal Reserve will have to raise interest rates at least once by year-end. Higher rates would cool inflation but also threaten to slow the economy and undercut stock prices.
The average long-term US mortgage rate has already climbed to its highest in nine months, which could discourage building AI data centres that are fuelling economic growth.
On the positive side, J.M. Smucker jumped 9.4% after reporting stronger profit than expected. The company behind Folgers, Hostess and other brands benefited from higher prices for coffee and sweet baked goods.
Nuvalent soared 39.1% after GSK agreed to buy the biotech company for $US10.6 billion. GSK's US-traded shares added 1.4%.
In Asia, South Korea's Kospi jumped 8.2%, nearly recovering Monday's 8.3% plunge. It's been tied to big tech stocks like SK Hynix and Samsung Electronics.
Back home, the Australian sharemarket is set to edge higher, with futures pointing to a gain of 14 points, or 0.2%, at the open. The ASX fell 0.2% on Tuesday after recovering from a sharp early sell-off. The Australian dollar was trading at US70.29¢.