US equity indices concluded Wednesday's session with declines, primarily driven by a significant downturn in semiconductor stocks, as market participants questioned the sustainability of the recent AI-fueled rally. The S&P 500 dropped 0.22% to 7,483.23, while the Nasdaq 100 experienced a more pronounced fall of 1.5%. The broader Nasdaq Composite also lost 0.66% to close at 26,040.03. This tech-led decline offset support from improving non-tech sectors and comments from Fed Chair Kevin Warsh regarding reduced inflation risks.
Major chipmakers were at the forefront of the selloff, with investors expressing concerns that AI-related investments might be overextended. Micron Technology plummeted 10.6%, AMD lost 6.9%, and Intel dropped 9%. The PHLX Semiconductor Index (SOX) fell by 6.3%. This weakness came despite Micron Technology announcing an agreement to supply LPDRAM, NOR, and DRAM products to General Motors for future vehicles.
In contrast to the broader tech downturn, Meta Platforms surged 8.8% following reports that it plans to develop a cloud business to monetize its excess AI computing capacity. This move positions Meta to compete with other hyperscalers. Other "Magnificent Seven" companies also saw gains, with Microsoft rising 3%, Amazon gaining 1.4%, and Alphabet up 1.1%. The Dow Jones Industrial Average closed nearly flat, showing a slight decrease of 0.03% to 52,305.24, as non-tech sectors demonstrated resilience.
Contributing to market sentiment, Fed Chair Kevin Warsh indicated that inflation risks are diminishing, which could lessen the urgency for a hawkish response from the Federal Reserve. US manufacturing activity expanded for the sixth consecutive month, and input cost pressures eased, according to data from the Institute for Supply Management, even though the PMI dropped slightly to 53.3 from 54.0. Traders slightly pared their rate-hike expectations, though most still anticipate at least one hike from the Fed in 2026. Investors are now awaiting the key monthly US jobs report due on Thursday, as markets will be closed on Friday for the Fourth of July holiday.
