Stocks generally fell across asset classes as investors debated whether strong earnings truly justified further advances in the artificial intelligence sector, amidst rising uncertainty in the Middle East. S&P 500 futures dropped by 0.2% and Nasdaq 100 futures by 0.5%. While Taiwan Semiconductor Manufacturing Co. reported strong earnings and an increased sales outlook, it didn't spark new gains in the AI-fueled sector. Europe's Stoxx 600 also declined by 0.5%. Brent crude maintained prices above $84 a barrel, even as the US struck Iran for the fifth consecutive day, hitting an oil tanker. Treasuries saw a slight dip, with the 10-year yield increasing by two basis points to 4.56%, and gold experienced its first day of losses in three.
The prominent role of chipmakers in this year's stock market gains is now being challenged. Traders are concerned about high stock valuations and whether AI hyperscalers might be overbuilding capacity. Investors are actively seeking opportunities to diversify into other AI-related sectors that offer more attractive pricing. Richard Flynn, managing director at Charles Schwab UK, commented on the market's high concentration, suggesting little room for error and highlighting elevated global geopolitical risks, which contribute to a cautious macro outlook. While chipmaking-related stocks were down in the US premarket, technology laggards like software shares saw increased bids, with Alphabet Inc. leading gains among the Magnificent Seven.
In corporate news, Taiwan Semiconductor Manufacturing Co. increased its spending and revenue projections, confident about continued strong demand for chips and data centers through 2027. Uber Technologies Inc. agreed to acquire Delivery Hero SE for $14.8 billion. Syngenta Group's planned $5 billion Hong Kong IPO faces delays. ABB Ltd. is set to acquire Rotork Plc for approximately $5.5 billion to expand its electrification and automation sectors. South Korean authorities also temporarily halted new listings of single-stock leveraged exchange-traded funds, which some market participants blame for heightened market volatility due to their required daily rebalancing.
