The S&P 500 ended Monday nearly flat, experiencing a mixed session where broad market gains and declining oil prices counteracted a significant selloff in the semiconductor sector. The chip industry, represented by the iShares Semiconductor ETF (SOXX), dropped over 3%, and a gauge of semiconductor companies fell 4.3%, pulling the Nasdaq 100 down more than 1%. This retreat was fueled by deepening concerns over "circular financing" within the AI ecosystem, specifically highlighted by reports of Nvidia exploring a $250 billion guarantee to back an OpenAI data center project, raising questions about the sustainability and genuine demand driving the AI buildout.
Despite the semiconductor slump, other factors prevented a broader market decline. The Dow Jones Industrial Average rose by 0.51% (262.83 points) to 52,210.08, buoyed by software firms like Salesforce and Microsoft. Meanwhile, oil prices plunged, with Brent crude dropping $8.42 (8.7%) to close at $88.36 a barrel and West Texas Intermediate for September delivery plunging $6.70 (7.5%) to settle at $82.61 a barrel. This drop in oil prices is expected to ease inflationary pressures and reduce the likelihood of aggressive interest rate hikes from the Federal Reserve, whose policy announcement is anticipated on Wednesday.
Investors are now keenly focused on a busy week for corporate earnings, with over 170 companies in the S&P 500 reporting, including tech giants Microsoft, Meta Platforms, Apple, and Amazon. The emphasis will be on capital expenditure guidance and AI monetization metrics, especially after previous aggressive infrastructure spending updates from Alphabet and Tesla led to sector drawdowns. Analysts like Greg Boland from Moomoo and Hebe Chen from Vantage Global Prime highlighted the ongoing investor skepticism regarding AI sector spending, returns, and valuations, underscoring that doubts are deepening, not fading.
