U.S. stocks closed mixed on Monday, heavily influenced by a widespread retreat among chipmakers, although this was partially counterbalanced by falling oil prices. The Nasdaq Composite was down 0.18%, while the Dow Jones Industrial Average rose 0.51% and the S&P 500 saw a marginal gain of 0.02%. The sell-off in semiconductor stocks was largely driven by escalating concerns over "circular financing" within the artificial intelligence (AI) ecosystem. Reports of Nvidia potentially providing a $250 billion guarantee for an OpenAI data center project raised questions about suppliers financing their own customers, leading to a broader drop across the sector.
Individual chip stocks experienced significant declines. Nvidia fell 4.99%, while Advanced Micro Devices and Teradyne dropped more than 5% and 4% respectively. Micron Technology shed 2.25%. The iShares Semiconductor ETF (SOXX) was down more than 3% at a one-week low. Other notable losers included Sandisk (down more than 11%), Lam Research, ASML Holding NV, Applied Materials, and Seagate Technology Holdings Plc (all down more than 5%).
Compounding the anxieties in the chip sector were reports of increased international competition. Chinese firm CXMT surged 465% on its debut on the Shanghai Stock Exchange's Star Market, reaching a valuation of approximately 3.28 trillion yuan. Additionally, a state-backed Chinese company reportedly began mass production of lithography machines, a domain previously dominated by Dutch firm ASML, which saw its stock dip. These developments, along with concerns about possible overcapacity and whether massive AI investments will pay off, contributed to the sector's decline.
Despite the weakness in chip stocks, the broader market saw some offsetting factors. Oil prices plunged, with West Texas Intermediate crude for September delivery dropping 7.5% to settle at $82.61 a barrel and Brent crude falling 8.7% to $88.36 a barrel. This drop in oil prices is expected to ease near-term cost pressures ahead of the Federal Reserve's interest rate decision, where rates are widely anticipated to remain unchanged. Software stocks rallied, with Salesforce up more than 4% and Microsoft up more than 2%, providing some support to the overall market. Investors are now keenly awaiting a busy week of corporate earnings, including reports from Microsoft, Meta Platforms, Apple, and Amazon, to gauge AI spending and monetization metrics.
